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On Thursday, BofA Securities analyst Robert Ohmes increased the price target on Advance Auto Parts stock (NYSE:AAP) to $39.00, up from the previous target of $33.00. The stock, currently trading at $49.28 with a market cap of $1.87 billion, has seen significant pressure recently, with InvestingPro data showing a 54% decline over the past year. Despite the higher price target, the firm maintained its Underperform rating on the company’s shares.
Advance Auto Parts reported an adjusted earnings per share (EPS) of -$0.22 for the first quarter, which was an improvement compared to the -$0.78 consensus estimate and the -$0.79 estimate from BofA Securities. According to InvestingPro analysis, the company operates with a significant debt burden of $4.15 billion, though analysts predict a return to profitability this year. The company’s comparable store sales (comps) decreased by a slight 0.6%, which was better than both the consensus estimate of -2.0% and BofA’s own estimate.
The improvement in first-quarter comps was more pronounced in the latter half, attributed to reduced weather volatility and the normalization of tax refunds. Notably, the company’s Professional (Pro) segment experienced eight consecutive weeks of positive comps, a trend that has carried over into the second quarter.
Gross margin (GM) saw a contraction of 50 basis points to 42.9%, which was below the 43.2% gross margin projected by BofA Securities. This decrease in gross margin was partly due to a 90 basis point impact from liquidation sales. Additionally, adjusted selling, general, and administrative (SG&A) expenses experienced a deleverage of 180 basis points, driven by higher labor costs.
In other recent news, Advance Auto Parts reported its first-quarter 2025 results, showcasing a notable earnings beat. The company posted an adjusted diluted loss per share of $0.22, outperforming the anticipated loss of $0.69. Revenue reached $2.58 billion, exceeding the forecast of $2.51 billion. Following these results, Goldman Sachs adjusted its price target for the company to $48 while maintaining a Neutral rating, highlighting better-than-expected revenue and earnings. Similarly, Truist Securities raised its price target to $51, citing a stronger-than-anticipated performance with sales slightly surpassing expectations.
William Blair analysts maintained a Market Perform rating, noting the effectiveness of the company’s turnaround efforts under CEO Shane O’Kelly. These improvements have been linked to strategic changes in inventory management and pricing strategies, which have shown tangible results in select markets. Advance Auto Parts is also navigating a competitive market, with potential favorable trends in pricing due to the industry’s defensive nature. The company expects sequential improvement in comparable sales throughout the year, with a focus on expanding its store footprint and optimizing distribution centers.
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