DA Davidson lifts Advance Auto Parts target to $47, keeps neutral

On Monday, DA Davidson adjusted the price target for Advance Auto Parts stock (NYSE:AAP), increasing it to $47.00 from the previous $45.00, while maintaining a Neutral rating on the company’s shares. The stock, currently trading at $48.67, has shown remarkable momentum with a 38.94% surge in the past week. The firm’s analyst, Michael Baker, cited the stock’s recent performance, which he attributed to early signs of successful turnaround initiatives and a high short interest for a stock that has lagged behind its peers both year-to-date and over the past few years.

Advance Auto Parts has demonstrated some positive trends that suggest its latest management-led turnaround efforts may be gaining traction. According to InvestingPro data, the company faces significant challenges, with a net loss of $580 million in the last twelve months and 10 analysts recently revising their earnings estimates downward. Despite these developments, the market remains cautious about the company’s potential for a successful turnaround. This skepticism is reflected in the company’s current valuation and the sell-side’s estimates.

The analyst noted that the company has a history of mixed results with previous management teams, which contributes to the current wary sentiment. However, Baker pointed out that if the current turnaround strategy proves effective, there is still considerable room for the stock’s value to increase.

The updated price target of $47 is based on a 12-times multiple of the firm’s estimated earnings per share (EPS) for the year 2026. DA Davidson’s report includes insights from the company’s recent earnings call and additional analysis provided in a separate note issued earlier, which detailed the quarterly results and guidance.

In summary, while DA Davidson sees potential upside for Advance Auto Parts stock if the turnaround strategy is successful, the firm remains neutral at this time, reflecting the broader market’s cautious stance on the company’s prospects. The stock currently trades at a high EBITDA multiple of 20.54x, though it maintains a 20-year track record of consistent dividend payments. For deeper insights into AAP’s valuation and 8 additional exclusive ProTips, visit InvestingPro, where you’ll find comprehensive analysis and Fair Value estimates.

In other recent news, Advance Auto Parts has been the focus of several analyst updates following its financial performance. BMO Capital Markets raised its price target to $50, maintaining an Outperform rating, after the company surpassed expectations with its first-quarter results, particularly in its Pro business sector. TD Cowen also increased its price target to $53, citing strong results and improved margins, while retaining a Hold rating. The analyst noted the company’s progress in the Do-It-For-Me segment and promising pilot programs.

RBC Capital Markets maintained a price target of $44, acknowledging positive key performance indicators but calling for more evidence of sustained improvement. Meanwhile, JPMorgan adjusted its target to $44, highlighting better-than-expected comparable store sales and improved expense efficiency. The firm maintained a Neutral rating, recognizing the company’s efforts to stabilize its business.

BofA Securities increased its price target to $39, despite maintaining an Underperform rating, as Advance Auto Parts reported an adjusted earnings per share of -$0.22, better than expected. The company’s comparable store sales also showed a smaller decline than anticipated, with improvements noted in the Professional segment. Across the board, analysts have expressed cautious optimism, with several firms adjusting their forecasts in light of the company’s recent performance.

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