AutoZone Stock Plummets 6% on Weak Comparable Sales Growth

• The consensus price target for AutoZone, Inc. (NYSE:AZO) has shown a consistent upward trend, indicating a favorable view of the company's performance and growth potential.
• AutoZone's stock has experienced a 2.8% increase since its last earnings report, suggesting potential for continued upward momentum.
• Strategic initiatives such as providing commercial credit, delivery services, and automotive diagnostic and repair software are likely contributing to the positive sentiment among analysts.

AutoZone, Inc. (NYSE:AZO) is a prominent player in the automotive retail industry, specializing in the distribution of replacement parts and accessories for a variety of vehicles. The company caters to a wide range of automotive needs, offering products for cars, SUVs, vans, and light trucks. AutoZone's offerings include automotive hard parts, maintenance items, and accessories, as well as non-automotive products. Additionally, the company provides commercial credit, delivery services, and automotive diagnostic and repair software through its ALLDATA brand.

The consensus price target for AutoZone's stock has shown a consistent upward trend over the past year. A month ago, the average price target was $3,390, reflecting a positive outlook from analysts. This is an increase from the $3,263.83 average price target reported a quarter ago. A year ago, the average price target was $3,258.30, indicating a steady rise in analysts' expectations for AutoZone's stock. This trend suggests that analysts have a favorable view of the company's performance and growth potential.

AutoZone's stock has experienced a 2.8% increase since its last earnings report 30 days ago. This recent performance raises the question of whether the upward trend can continue. Analyst Kate McShane from Goldman Sachs has set a price target of $2,296 for the stock, suggesting a positive outlook for AutoZone's future performance. This aligns with the overall positive sentiment from analysts, as highlighted by the upward trend in the consensus price target.

The company's strong market presence and extensive product offerings likely contribute to the positive sentiment among analysts. AutoZone's strategic initiatives, such as providing commercial credit and delivery services, as well as offering automotive diagnostic and repair software, further enhance its position in the market. Investors may find this information useful when considering AutoZone as a potential investment opportunity, given the favorable outlook from analysts and the company's recent stock performance.

AutoZone, Inc. (NYSE:AZO) is a leading retailer and distributor of automotive replacement parts and accessories in the United States. The company is known for its extensive product range and strong customer service. AutoZone competes with other major players in the automotive parts industry, such as Advance Auto Parts and O'Reilly Automotive.

AutoZone is set to release its quarterly earnings on December 10, 2024, with analysts estimating an earnings per share (EPS) of $33.60. This represents a 3.2% increase from the same period last year, as highlighted by the stability in earnings estimates over the past 30 days. This stability is crucial as it often influences investor reactions and short-term stock price movements.

The company's revenue is projected to reach approximately $4.31 billion, reflecting a 2.6% rise from the previous year's quarter. AutoZone's price-to-earnings (P/E) ratio of 21.13 suggests that the market values its earnings relatively high. The price-to-sales ratio of 3.02 and enterprise value to sales ratio of 3.67 further indicate the market's positive valuation of its revenue and sales.

AutoZone's financial metrics provide additional insights into its valuation. The enterprise value to operating cash flow ratio of 22.61 highlights the company's cash flow efficiency. The earnings yield of 4.73% offers a perspective on the return on investment for shareholders. However, the debt-to-equity ratio of -1.98 suggests a higher level of debt compared to equity, which could be a concern for some investors.

The company's current ratio of 0.84 indicates its ability to cover short-term liabilities with short-term assets. This ratio is an important measure of liquidity, showing that AutoZone may face challenges in meeting its short-term obligations. As the earnings report approaches, these financial metrics will be closely watched by investors and analysts alike.

Goldman Sachs analysts downgraded AutoZone (NYSE:AZO) to Sell from Neutral, adjusting their price target on the stock down to $2,917 from $3,205. The shift reflects a strategic reallocation toward companies more aligned with discretionary goods, where Goldman expects stronger growth as interest rates stabilize and consumer spending diversifies.

The analysts outlined several concerns about AutoZone’s outlook, beginning with a strain on lower-income consumers, who form a substantial part of AZO's customer base. This demographic is likely to remain under financial pressure through 2025. Additionally, with car prices normalizing, the analysts anticipate a potential dip in repair demand, impacting AutoZone's core revenue.

Customer sentiment metrics for AutoZone have also shown decline, with the brand’s NPS and NPI scores nearing three-year lows, according to HundredX data. Furthermore, Goldman Sachs sees potential financial strain as the company faces upcoming 2025 debt obligations, raising concerns about interest expenses and the impact on stock buybacks.

The valuation analysis points to elevated levels for AZO shares, which Goldman finds hard to justify amid slower growth and heightened risks.

AutoZone (NYSE:AZO) reported its fourth-quarter earnings, falling short of analyst expectations and leading to a more than 2% drop in its stock intra-day today.

The auto parts retailer posted adjusted earnings per share of $48.11 for the quarter, missing the Street estimate of $53.61. Revenue for the quarter reached $6.2 billion, slightly below the expected $6.23 billion, though it marked a 9.0% year-over-year increase.

Same-store sales for the quarter grew by 0.7% over a 16-week period, with domestic same-store sales edging up just 0.2%. AutoZone pointed to ongoing challenges in its discretionary merchandise categories, which have faced deferrals, as a key factor affecting performance. Phil Daniele, AutoZone's President and CEO, acknowledged the headwinds but noted that the company's Commercial sales showed improving momentum.

For the full fiscal year 2024, AutoZone reported $18.5 billion in sales, up 5.9% from the prior year. Earnings per share grew by 13.0%, reaching $149.55.

TD Cowen analysts reaffirmed a Buy rating on AutoZone (NYSE:AZO), maintaining a price target of $3,450.

The analysts highlighted three key points following a meeting with AutoZone's CFO. First, they noted that the immediate market conditions remain tough for both the DIY (Do It Yourself) and DIFM (Do It For Me) segments, although the fundamental long-term drivers in the industry are still robust. Second, the analysts expressed optimism that investments in the DIFM channel are expected to spur growth over time. Third, while there may be pressure on gross margins in fiscal year 2025, the longer-term outlook suggests margins should be stable or slightly positive.

Mizuho Securities analysts started covering AutoZone (NYSE:AZO) with a Buy rating and a price target of $3,450, highlighting the company's strong push into the over $90 billion U.S. commercial parts market, where it currently holds about a 5% share.

The analysts see this as just the beginning, with a potential additional $2-3 billion revenue opportunity in the medium term, especially as competitor Advance Auto faces challenges. AutoZone's leading position in the Do-It-Yourself (DIY) sector, combined with price stickiness, international growth prospects, and a significant share buyback program, positions it as a top pick in the auto parts sector according to the analysts.

Mizuho Securities analysts started covering AutoZone (NYSE:AZO) with a Buy rating and a price target of $3,450, highlighting the company's strong push into the over $90 billion U.S. commercial parts market, where it currently holds about a 5% share.

The analysts see this as just the beginning, with a potential additional $2-3 billion revenue opportunity in the medium term, especially as competitor Advance Auto faces challenges. AutoZone's leading position in the Do-It-Yourself (DIY) sector, combined with price stickiness, international growth prospects, and a significant share buyback program, positions it as a top pick in the auto parts sector according to the analysts.