RBC Capital on Monday raised its price target for Advance Auto Parts Inc. (AAP) to $63 from $57, while keeping a Sector Perform rating on the stock. The broker noted the new target sits at a modest premium to Advance Auto Parts' most recent trading price of $58.08.
Analytic adjustments and outlook
In updating its models, RBC Capital lowered its comparable sales estimate for the first quarter to 2% from a prior 3% projection and trimmed its adjusted earnings per share (EPS) estimate for that quarter to $0.31 from $0.35. Despite the top-line headwinds that prompted those cuts, the firm highlighted that the company is continuing to make progress on operating margins.
Looking further ahead, RBC now expects comparable sales growth of 1.3% for 2026, down from its earlier 2.1% forecast, and reduced its 2026 adjusted EPS projection to $2.85 from $3.00. For 2027 the firm left its comparable sales growth estimate unchanged at 1.5% but lowered adjusted EPS to $4.21 from $4.40.
Valuation mechanics behind the new target
The $63 target is constructed using roughly 22 times RBC's revised 2026 adjusted EPS estimate of $2.85, an increase from the prior multiple of about 19 times. On the firm's 2027 numbers the target equates to roughly 15 times the revised $4.21 EPS estimate.
RBC framed part of the valuation move around management credibility. The firm said that management’s pullback from a previously stated 7% operating margin target for 2027 appears to be related to timing and macroeconomic influences rather than executional shortcomings. According to RBC, ongoing consistent execution and rebuilding of credibility could warrant a higher valuation multiple, though the broker continued to see reason to apply a discount relative to peers.
Analyst revisions and market performance
Data referenced by the research update shows that six analysts have lowered their earnings estimates for Advance Auto Parts for the upcoming period, but consensus still calls for the company to be profitable in the fiscal year 2026 with an EPS forecast of $2.56. The stock has delivered a strong year-to-date return of 50.63%, even while trading at a relatively elevated price-to-earnings ratio of 52.08.
Additional valuation context included a Fair Value assessment that marks the stock as currently fairly valued and a Financial Health Score of 1.98, characterized as "FAIR." The research service also indicated the availability of further analytical materials and tips on the company through its Pro Research offering.
Earnings beat highlights
Separately, Advance Auto Parts reported robust fourth-quarter 2025 results. The company posted EPS of $0.86, double the $0.43 analysts had anticipated, representing a 100% surprise. Quarterly revenue totaled $2.0 billion, which was slightly above the $1.95 billion forecast. Those outcomes were identified as evidence of improved financial performance and operational execution and provoked a positive reaction in the market.
Observers and market participants noted the significance of these results because they surpassed both EPS and revenue expectations. The company's ability to top forecasts may influence future analyst coverage and investor sentiment, though RBC's revised near-term estimates reflect caution tied to top-line dynamics and broader macro conditions.
Contextual takeaways
- RBC raised its price target to $63 while maintaining a Sector Perform stance.
- The firm reduced its short-term sales and EPS outlooks but pointed to ongoing margin improvement.
- Advance Auto Parts reported a significant Q4 2025 earnings beat, with EPS and revenue above expectations.