Advance Auto Parts' (AAP) Q1 beat was encouraging, but while its turnaround story is progressing, investors still need to see sustained topline momentum and progress toward profitability and debt targets, Morgan Stanley said Thursday in a note.
Q1 results reinforce confidence that the company's initiatives are gaining traction. However, execution risk still persists, especially as it navigates a more volatile consumer background, faces tougher comparisons in the second half, and pricing-related benefits roll off, according to the note.
The analysts said they view the company's decision to maintain guidance as prudent, given near-term consumer volatility, typical "shoulder season" softness between tax refund spending and peak summer driving, and the start of lapping pricing-related tailwinds.
The firm said it is keeping its 2026 EPS estimates unchanged and raising its 2027 estimates by 4%, reflecting the company's unchanged full-year guidance despite the topline and earnings beat, as well as improved visibility into an additional 100 basis points of margin expansion in 2027.
Morgan Stanley kept an equal weight rating on Advance Auto Parts and raised the price target to $65 from $60.
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