RBC maintains Advance Auto Parts stock at $44 target

On Monday, RBC Capital Markets maintained their Sector Perform rating for Advance Auto Parts Inc. (NYSE: NYSE:AAP) with an unchanged price target of $44.00. The firm’s analyst acknowledged the company’s efforts in meeting its first-quarter promises, noting that key performance indicators (KPIs) are moving in the right direction. According to InvestingPro data, the stock appears undervalued at its current price of $48.67, though 10 analysts have recently revised their earnings estimates downward. Despite this progress, the analyst expressed a need for more substantial evidence of improvement before recommending the stock to investors.

Advance Auto Parts has recently followed through on its commitments for the first quarter, with the stock showing significant momentum by gaining nearly 39% in the past week. The company’s progress is noted amidst a complex backdrop with many moving parts, including a challenging revenue decline of 21% over the last twelve months. While the early signs are positive, the analyst from RBC Capital Markets has called for further confirmation of sustained progress due to the company’s history of facing challenges. InvestingPro subscribers have access to 8 additional key insights about AAP’s current market position and future prospects.

In light of the latest company commentary, RBC Capital has made slight adjustments to the forecasted financial cadence. However, these changes have not significantly affected the annual estimates, which remain close to previous projections. For the fiscal years 2025 and 2026, RBC Capital now anticipates comparable sales growth of 0.4% and 1.0%, respectively, a slight modification from the prior estimates of a 0.1% decrease and a 1.0% increase. Adjusted earnings per share (EPS) for the same years are now expected to be $1.08 and $2.58, up from the previous $1.06 and $2.57 estimates.

The price target set by RBC Capital Markets is based on approximately 17 times the revised 2026 adjusted EPS estimate of $2.58. The firm’s stance reflects a cautious optimism, recognizing the potential for improvement while also considering the company’s past performance and the need for consistent positive developments.

In other recent news, Advance Auto Parts reported better-than-expected financial results for the first quarter of 2025, with both revenue and earnings surpassing estimates. The company showed a smaller decline in comparable store sales of -0.6%, compared to the anticipated -2.0%. Analysts from BMO Capital Markets raised their price target for the company to $50, maintaining an Outperform rating, while BofA Securities increased their target to $39 but kept an Underperform rating. Goldman Sachs also adjusted their price target to $48, retaining a Neutral rating. These adjustments reflect the company’s strong quarterly performance and ongoing internal improvement initiatives.

JPMorgan revised its price target to $44, citing improved expense efficiency and a smaller-than-expected decline in operating income. William Blair analysts noted the effectiveness of the company’s turnaround efforts, particularly under CEO Shane O’Kelly’s leadership, marking a positive shift from previous years. The company has been addressing issues related to inventory and obsolete merchandise, resulting in improved sales productivity. Management expects further improvements in gross margins and aims for a significant operating margin expansion, focusing on operational enhancements and pricing strategies.

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