Advance Auto Parts' (AAP) margins are stabilizing, even if visibility on reaching a 7% operating margin by 2027 is still uncertain, Morgan Stanley said in a note Tuesday, following the company's Q4 results.

The investment firm said that on an about 1.5% comp for 2026, which is the midpoint of guidance, it believes a roughly 5% EBIT margin path is "more achievable, assuming continued delivery of initiatives aimed at driving the top-line."

In 2026, the company will have to show "progress across gross margin and SG&A efficiency, driven by advances in merchandising, supply chain simplification, and store-level improvements that support longer-term margin expansion," the note said.

The auto parts sector is benefiting from "structural demand drivers" like an increase in miles driven and aging vehicles, but Advance Auto's "upside is constrained without stable comp momentum," the investment firm said.

Morgan Stanley raised Advance Auto's price target to $60 from $45 and has an equalweight rating on the company.

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