DA Davidson has revised its price objective for Advance Auto Parts (AAP) to $58 from $47, but the broker-dealer left its recommendation at Neutral. The move comes as the shares trade around $57.15 and have delivered a year-to-date gain of 50.63%, according to InvestingPro data, which also indicates the shares sit marginally above their Fair Value estimate.
The firm highlighted the retailer's margin ambition as the primary driver of the updated target. Management set a 7% margin objective as a reasonable midterm goal when it unveiled the plan in November 2024. While management continues to pursue that target, DA Davidson notes the path to achieving 7% by 2027 is proving difficult amid current market dynamics.
Advance Auto Parts has experienced a contraction in revenues, shrinking 5.42% over the last twelve months. That top-line pressure is a significant constraint on near-term margin expansion, and DA Davidson acknowledged the uncertain macro environment as a factor weighing on growth. Market participants appear to have anticipated a delay in reaching the 7% margin target; the consensus 2027 margin estimate sits at 4.8%.
DA Davidson further observed that lowering the formal 7% target would not change consensus estimates, allowing investors to concentrate on an alternative implied 2027 margin range of 4.8% to 5.5%. The firm emphasized that Advance Auto Parts is still working toward its longer-term profitability objectives despite near-term headwinds.
Operational results that arrived alongside the analyst activity showed the company surpassing expectations in its fourth quarter of fiscal 2025. Advance Auto Parts reported earnings per share of $0.86, double the anticipated $0.43, representing a 100% earnings surprise. Quarterly revenue reached $2.0 billion, modestly ahead of the $1.95 billion forecast.
Other sell-side moves followed the earnings release. RBC Capital raised its price target on Advance Auto Parts from $57 to $63 while retaining a Sector Perform rating. At the same time, RBC trimmed its first-quarter comparable sales estimate from 3% to 2% and adjusted its first-quarter EPS projection to $0.31 from $0.35. RBC pointed to ongoing improvement in operating margins as a constructive element even as top-line pressure persists.
Taken together, the analyst revisions and the quarterly beat illustrate a mixed financial picture: stronger-than-expected profitability metrics in the most recent quarter contrasted with declining revenues and a potentially delayed margin ramp through 2027. The developments reflect the current financial landscape for Advance Auto Parts, where margin trajectory and top-line stability will likely remain central to investor assessments.