AAP Stock Forecast & Price Target

Advance Auto Parts is projected to generate sales of $8.574 billion, despite an anticipated decline of 5.7%, with operating margins expected to expand by 180 basis points to 2.2%. The company has demonstrated strong comp performance, particularly in markets serviced by its distribution hubs, which have shown a comp lift of approximately 100 basis points, suggesting enhanced operational efficiency. Additionally, the resilience of the Pro business, which has shown sequential improvement, coupled with a moderate positive inflation rate in same SKUs, supports the outlook for improved traffic and sales growth in the coming periods.

Advance Auto Parts has reiterated its full-year outlook but has trimmed its earnings per share (EPS) forecast due to increased interest expenses from a recent debt offering, lowering the range to $1.20-$2.20 from $1.50-$2.50. There is substantial risk regarding the company’s ability to achieve significant gross margin expansion in the coming years, particularly if comparable store sales growth remains lackluster. Contributing factors to this negative outlook include heightened competition, constraints on new unit expansion, and external pressures such as rising fuel prices and unpredictable weather patterns that could adversely affect consumer demand for auto parts.