AutoZone’s Strong Growth Prospects and Market Share Expansion Justify Buy Rating

Analyst Robert Ohmes of Bank of America Securities reiterated a Buy rating on AutoZone (AZO – Research Report), retaining the price target of $4,800.00.

Robert Ohmes has given his Buy rating due to a combination of factors, including AutoZone’s strong domestic sales growth and the expectation that this momentum will continue. Despite experiencing temporary margin pressures due to higher inventory shrink and startup costs, the company is expected to stabilize its gross margin in the next quarter. The growth in the commercial segment, which now makes up a significant portion of sales, is anticipated to continue, supported by vendor negotiations and strategic pricing actions.
Additionally, AutoZone’s investments in SG&A have been translating into sales growth, with the company opening new stores both domestically and internationally. These efforts are expected to help AutoZone increase its market share. Ohmes reiterates the Buy rating based on AutoZone’s ability to gain market share in both the DIY and professional segments, its resilience in economic downturns, and the potential benefits from inflation and favorable market dynamics between used and new cars.

In another report released yesterday, BMO Capital also maintained a Buy rating on the stock with a $4,100.00 price target.