Advance Auto Parts stock outlook balanced as UBS maintains Neutral rating

Investing.com - UBS has reiterated its Neutral rating and $65.00 price target on Advance Auto Parts (NYSE:AAP) ahead of the auto parts retailer’s third-quarter earnings report, due October 30. The stock, currently trading at $53.87, has shown remarkable resilience with a 66.1% surge over the past six months.

UBS expects Advance Auto Parts likely achieved low-single digit same-store sales growth in the third quarter, with its do-it-for-me (DIFM) segment showing mid-single digit increases while do-it-yourself (DIY) sales remained relatively flat. This comes against a backdrop of -4.85% revenue decline in the last twelve months, though analysts on InvestingPro project a return to profitability this year.

The firm believes the company is making progress with margin improvements, maintaining a healthy gross margin of 42.08%, though these efforts may have been complicated by the current tariff situation affecting the automotive parts industry. According to InvestingPro’s analysis, the stock is currently trading near its Fair Value, with 6 additional exclusive insights available for subscribers.

UBS also noted that the bankruptcy of First Brands might have added "another layer of complexity" to Advance Auto Parts’ sourcing operations during the quarter.

While acknowledging that the company continues to make progress with its transformation efforts, UBS maintained that such transitions typically move in "non-linear fashion" and concluded that the risk-reward profile for the stock remains "equally balanced."

In other recent news, Advance Auto Parts is preparing for its fiscal third-quarter results, scheduled for October 30. Raymond James has reiterated its Market Perform rating, highlighting opportunities for margin improvement through various strategic initiatives. Meanwhile, UBS maintained its Neutral rating with a $65 price target, citing the company’s confidence in its ongoing transformation efforts. Truist Securities raised its price target to $53, acknowledging business stabilization and improvement, though noting challenges remain to meet 2027 targets. Evercore ISI also increased its price target to $60, pointing to positive developments in the professional installer segment. DA Davidson lowered its price target to $63, maintaining a Neutral rating, and noted positive trends from the company’s three-year turnaround plan. These developments reflect a mix of cautious optimism and acknowledgment of the challenges facing Advance Auto Parts.

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