Raymond James reiterates Market Perform on Advance Auto Parts stock

Investing.com - Raymond James maintained its Market Perform rating on Advance Auto Parts (NYSE:AAP), currently trading at $54.05, ahead of the company’s fiscal third-quarter results scheduled for October 30. According to InvestingPro data, the company has not been profitable over the last twelve months, though analysts expect a return to profitability this year.

The firm cited a back-end loaded outlook that requires significant execution on margin initiatives to meet fiscal year 2025 guidance. Raymond James acknowledged credible margin improvement opportunities through assortment depth, market hubs, vendor cost savings, and supply chain redesign that should boost EBIT margins long-term. The company’s current gross profit margin stands at 42.1%, while revenue has declined 4.85% over the last twelve months.

Raymond James expressed concerns about elevated near-term execution risks, particularly regarding vendor negotiations, labor productivity, and DIY business stabilization. The firm also noted its updated model for FY26 earnings per share reflects lower assumptions for other income. InvestingPro analysis indicates the stock is trading at a high EBITDA multiple of 23x, suggesting elevated valuation levels despite operational challenges.

Advance Auto Parts currently trades at approximately 27 times Raymond James’ forward earnings estimate, compared to its one-year and three-year historical median of about 16 times. This valuation exceeds some competitors, with O’Reilly Automotive trading at 32 times, AutoZone at 26 times, and Genuine Parts Company at 16 times forward earnings.

Raymond James indicated it remains cautious about the speed of the company’s turnaround, stating that better visibility on professional customer share gains, DIY stability, and gross margin durability could warrant a more positive stance in the future.

In other recent news, Advance Auto Parts reported its second-quarter 2025 earnings, revealing an adjusted diluted EPS of $0.69, which exceeded the forecast of $0.53. The company’s revenue reached $2 billion, slightly surpassing the anticipated $1.97 billion, although it represented an 8% decrease from the previous year. Analysts from Evercore ISI raised their price target for Advance Auto Parts to $60, citing positive developments in the company’s professional installer segment. Truist Securities also adjusted its price target to $53, noting business stabilization despite ongoing challenges. DA Davidson lowered its price target to $63, acknowledging the early stages of a three-year turnaround plan with some positive trends. UBS maintained a Neutral rating with a $65 price target, highlighting the company’s confidence in its transformation efforts. These recent developments provide insight into Advance Auto Parts’ current market position and future prospects.

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