On Monday, Evercore ISI adjusted its price target on shares of AutoZone (NYSE: NYSE:AZO), a leading retailer in the automotive parts industry, to $3,300 from the previous $3,340, while maintaining an Outperform rating on the stock. The adjustment follows a period of unfavorable weather conditions and rising fuel costs, which are believed to have impacted the company's same-store sales growth.
The firm noted that AutoZone's domestic comparable sales growth is likely to be under 1%, which has delayed the expected acceleration in the Do-It-For-Me (DIFM) segment. Despite this, the margins are anticipated to remain stable, with inflationary pressures being offset by some reductions in the cost of goods sold (COGS). Investors are advised to be patient as the firm predicts DIFM comparable sales will eventually re-accelerate to a mid to high single-digit range.
The report also mentions that AutoZone's stock price has nearly returned to $3,000 following the release of results from peers Genuine Parts Company (NYSE:GPC) and O'Reilly Automotive (NASDAQ:ORLY), which has closed the valuation gap with ORLY to just 20%. The firm suggests that taking near-term profits from AutoZone, which it rates as Underperform, and reallocating them to ORLY, labeled as a 'Fab Five pick', could be a strategic move. ORLY has already reported weaker spring trends.
Evercore ISI anticipates that the softer fiscal third quarter and ongoing weakness in the DIFM sector could unsettle investors, potentially leading to a more significant stock price reaction for AutoZone compared to the 5% dip experienced by ORLY post-earnings. The firm estimates that a mid to high single-digit decrease in AutoZone's stock could see its price retract to just under $2,800.
InvestingPro Insights
As investors digest the latest analysis from Evercore ISI on AutoZone (NYSE: AZO), it's valuable to consider additional insights. According to InvestingPro data, AutoZone's market cap stands at a robust $51.55 billion, with a P/E ratio of 20.22, reflecting its current valuation in the market. The company's revenue growth over the last twelve months as of Q2 2024 has been steady at 5.57%, supporting the view that AutoZone continues to expand its financial footprint despite broader economic pressures.
Two InvestingPro Tips that stand out for AutoZone include the aggressive share buyback strategy management has been pursuing, which often signals confidence in the company's future, and the stock's low price volatility, which may appeal to investors seeking stability in turbulent markets. With these factors in mind, AutoZone's stock may still hold long-term appeal, particularly as analysts predict the company will remain profitable this year and has been profitable over the last twelve months.
For those looking to delve deeper into AutoZone's financial health and stock performance, additional InvestingPro Tips are available at https://www.investing.com/pro/AZO. Subscribers can access a total of 10 tips, and by using the coupon code PRONEWS24, they can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription. This depth of analysis could provide a more nuanced view of AutoZone's investment potential, especially in light of recent market dynamics.
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