Advance Auto Parts (AAP) Stock Slides After Target Cut – Does the 2025 Turnaround Still Hold Up?

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Advance Auto Parts (NYSE:AAP) stock is down sharply on December 9, 2025 after an analyst price-target cut and weak peer earnings. Here’s the latest on earnings, guidance, dividend, analyst forecasts and the ongoing three-year turnaround plan.

Market snapshot: A rough day for Advance Auto Parts stock

Advance Auto Parts, Inc. (NYSE: AAP) is back under pressure in Tuesday’s session (December 9, 2025).

By midday, AAP shares were trading in the high-$40s, down roughly 7% on the day, in sympathy with sector peer AutoZone’s earnings miss and a fresh price-target cut from Evercore ISI. ^[1]

According to recent data, AAP is now: ^[2]

Flat year-to-date in 2025
Trading around 27% below its 52-week high of $66.50 set in July 2025
Notoriously volatile, with more than 30 single-day moves over 5% in the last 12 months

So today’s drop fits a pattern: this is a turnaround stock that trades like it drinks too much coffee.

What happened on December 9, 2025?

Two big things hit the stock today:

Evercore ISI trims its price target
- Evercore ISI maintained an “In-Line” (essentially neutral/hold) rating on AAP
- It cut its 12-month price target from $60 to $58, citing a more cautious stance after the recent run-up and industry headwinds. ^[3]
That cut is notable because several other firms in late October already took targets down or kept them neutral even after the Q3 beat (Citigroup, JPMorgan, DA Davidson, Truist, Roth, etc.), reinforcing the idea that Wall Street sees limited upside and execution risk rather than a clean growth story. ^[4]
AutoZone’s earnings miss dents the whole auto-parts group
AutoZone reported fiscal Q1 results that missed profit expectations and slightly underwhelmed on same-store sales, triggering a sharp sell-off in its own shares and dragging down Advance Auto Parts and O’Reilly Automotive. ^[5] The logic: if the best-in-class operator (AutoZone) is struggling with costs and margins, the market assumes that AAP, which is still mid-turnaround, may face similar or worse pressure.

Put together, you’ve got a nice little cocktail of: “sector risk + valuation questions + volatile sentiment,” and AAP is wearing all of it in today’s price action.

2025: From problem child to active turnaround project

To understand today’s reaction, you have to rewind through the year.

Advance Auto Parts is in year one of a three-year plan aimed at fixing a long list of issues: subpar margins, a bloated store and distribution footprint, inconsistent supply chain performance, and weaker execution than peers like AutoZone and O’Reilly. ^[6]

Key elements of the turnaround:

Aggressive footprint optimization
- Closure of hundreds of underperforming stores and consolidation of distribution centers
- Plan to cut U.S. DCs to 16 by the end of 2025, from 38 in 2023 ^[7]
- Shift toward larger “market hub” locations to improve delivery speed and inventory availability
Margin rebuild over revenue growth
The company is explicitly prioritizing profitability and efficiency over raw sales growth, targeting about 7% adjusted operating margin by 2027 if execution stays on track. ^[8]
Balance sheet clean-up
AAP carries meaningful leverage (around the mid-single-digit billions of long-term debt), and management has been using asset sales and restructuring to improve its financial profile. ^[9]

So 2025 is basically “Year 1 of Boot Camp.” The question is whether the early data supports the story.

Financial performance: A messy, but improving picture

Q3 2025 – the first real “turnaround” quarter

The third quarter of 2025 is where the company started to look more like a recovery story and less like a slow-motion car crash.

Highlights from Q3 2025: ^[10]

Net sales: $2.0 billion (down slightly from $2.1 billion a year ago, largely due to planned store closures)
Comparable store sales:+3.0%, a meaningful improvement
Gross margin: 43.3% (up from 42.3%)
Adjusted gross margin: 44.8% of sales
Reported operating margin: 1.1%
Adjusted operating margin:4.4%, up from 0.7% in Q3 2024
Adjusted EPS: about $0.92, beating consensus estimates that were in the high-$0.70s range

The improvement is driven by:

Lower product costs via strategic sourcing
Savings from running fewer stores and a more consolidated distribution network
Tighter SG&A (selling, general and administrative) spending

However, it’s not all sunshine:

Cash flow is still ugly. Free cash flow through the first three quarters of 2025 was deeply negative, largely due to restructuring charges and working-capital drag. ^[11]
The company narrowed or tweaked parts of its guidance while reaffirming targets for margin expansion, showing that execution is still delicate. ^[12]

Q1 and Q2 2025 – setting the stage

Earlier in the year, results were more mixed:

Q1 2025 showed gross margin pressure from liquidation sales at closing stores and higher labor costs, which weighed on profitability. ^[13]
Q2 2025 saw operating margin compress to just over 1%, but management reaffirmed full-year guidance for sales, margin and free cash flow, signaling confidence in the restructuring track. ^[14]

The TL;DR:
Fundamentals in 2025 have trended in the right direction, especially on margins, but the cash flow and leverage profile are still fragile—which is exactly why investors freak out when the sector gets bad news or analysts trim targets.

New developments: dividend, leadership changes and insider signals

Even while fixing the business, Advance Auto Parts is trying to show investors it’s not in survival mode.

Dividend: steady but modest yield

AAP recently declared a cash dividend of $0.25 per share, payable on January 23, 2026. At a share price in the high-$40s, that implies a yield of roughly 2% annualized. Management has kept the dividend significantly lower than pre-crisis levels, balancing shareholder returns with the need to invest in the turnaround and manage debt. ^[15]

Supply chain leadership transition

On December 8, 2025, the company announced the appointment of Ronald Gilbert as Senior Vice President of Supply Chain, effective December 22. He will report directly to CEO Shane O’Kelly. ^[16]

Why this matters:

Supply chain performance has been central to AAP’s problems and its fix.
Under outgoing leader Stephen Szilagyi, AAP consolidated distribution centers (on track for 16 DCs by year-end 2025, down from 38 in 2023) and began rolling out “market hub” formats, with a target of 60 hubs by mid-2027. ^[17]
Bringing in a specialist with experience across large retail networks (Saks, Rite Aid, various logistics roles) is a signal that the supply chain overhaul is entering a new execution phase, not ending.

Insider activity

Recent filings show insider stock sales by at least one executive (EVP Kristen Soler sold roughly $390k worth of stock in mid-November). ^[18]

Insider selling isn’t automatically a red flag (people like to diversify or pay for life), but combined with volatility and a still-levered balance sheet, it’s something cautious investors keep on their radar.

Wall Street’s view: a cautious “hold” with low-50s price targets

Despite the recent Q3 beat and a strong rally in November, most analysts remain firmly on the fence.

Across multiple data providers:

The average 12-month price target clusters in the low-to-mid $50s, typically around $51–$54 per share. ^[19]
That implies anywhere from slight downside to moderate upside versus today’s high-$40s price, depending on whose numbers you use.
The consensus rating is a “Hold”, with only a very small minority calling it an outright Buy. Most see AAP as something between “show-me story” and “range-bound value trap” until margins and cash flow prove durable. ^[20]

On the earnings front, analyst estimates compiled by Yahoo Finance suggest: ^[21]

2025 EPS: around $1.8 (adjusted)
2026 EPS: approaching $2.7 if the turnaround continues to track

Those numbers still trail best-in-class peers by a wide margin, but they represent meaningful progress from the near-zero earnings profile the company had during the worst of its operational problems.

SWOT in plain English: what’s working, what isn’t

Recent third-party analyses and SWOT-style breakdowns highlight the following: ^[22]

Strengths

Large North American footprint with more than 4,000 company-operated stores and hundreds of Carquest locations
Growing Pro (professional installer) channel, supported by supply chain changes
Early margin gains from store closures, sourcing, and logistics consolidation
Turnaround plan has clear numerical targets for margin expansion through 2027

Weaknesses

Operating margin still well below 5% and significantly behind AutoZone and O’Reilly
High leverage and historically weak free cash flow make missteps costly
Market share still lags key competitors, and DIY demand is sensitive to consumer pressure

Opportunities

If the company actually reaches its 7% adjusted operating margin goal by 2027, earnings power could look very different from today
Market-hub store strategy and improved supply chain could boost service levels and win share in both DIY and Pro segments
Even modest re-rating in valuation could offer upside if the market starts to believe in sustainable margins

Threats

Intense competition from AutoZone, O’Reilly, Amazon, and big-box retailers
Macro headwinds: consumer stress, used-car trends, and pricing pressure in parts
Execution risk: integrating store closures, DC consolidation, new leadership and new operating models without breaking service levels

How today’s sell-off fits into the bigger story

Zooming out, the narrative looks something like this:

2023–early 2025 – Severe operational issues, big strategic reset, heavy restructuring.
2025 – Margin improvement shows up in the numbers; Q3 2025 is a genuine step forward, but cash flow and leverage concerns remain. ^[23]
Late 2025 – Stock rallies hard on the turnaround story (including a strong November), then gets knocked back when:
- Guidance is fine-tuned
- Sector leaders stumble on earnings
- Price targets move sideways to down, not up

Today’s drop, driven by Evercore’s target cut and AutoZone’s miss, is less about a single datapoint and more about the market saying:

“We like the direction, but we don’t fully trust the destination yet.”

What to watch next

For readers tracking AAP into 2026, the key catalysts and datapoints include:

Next quarterly results – Can AAP sustain 3%+ same-store sales and 4–5% adjusted operating margins, while showing improving free cash flow? ^[24]
Debt and capital allocation – How aggressively will management pay down debt versus maintaining the dividend and investing in store and hub growth? ^[25]
Supply chain metrics – With Ronald Gilbert stepping in, watch for KPIs like DC productivity, on-time delivery to Pro customers, and inventory turns. ^[26]
Analyst estimate revisions – Upward revisions to 2026–2027 EPS and cash-flow forecasts would signal growing confidence; downward revisions would confirm that current fears are justified. ^[27]