AutoZone Started With Buy Rating at Mizuho Securities

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.

Oppenheimer analysts downgraded AutoZone (NYSE:AZO) from Outperform to Perform and set a price target of $2,600.00. The downgrade is based on a more cautious outlook for auto parts retail as the analysts evaluate shifts within the discretionary sector for 2024. While they acknowledge that the underlying fundamentals for auto parts retail and key players in the industry remain strong, they anticipate that the tailwinds driven by the pandemic will continue to diminish.

This could potentially limit the potential for sales and earnings per share (EPS) growth for AutoZone and result in reduced investor interest. The analysts suggest that the current Street forecasts for AutoZone seem reasonable, but they are less optimistic about the potential for their stock multiples to increase significantly from current levels.

AutoZone (NYSE:AZO), a prominent automotive replacement parts and accessories retailer and distributor, announced its fourth-quarter financial results, surpassing analysts' expectations.

In the fourth quarter, AutoZone reported earnings per share of $46.46, exceeding the Street estimate of $45.22. The company's quarterly revenue amounted to $5.69 billion, surpassing the Street estimate of $5.62 billion. The company experienced a 1.7% increase in U.S. same-store sales.

CEO Bill Rhodes commented on the results, acknowledging a slow start to the quarter but highlighting improvements in the latter part of the period. He expressed confidence that the company's ongoing initiatives will drive stronger growth in fiscal 2024, despite lower-than-expected growth in domestic Commercial.

UBS analysts upgraded AutoZone (NYSE:AZO) stock from Neutral to Buy and raised their price target from $2,800 to $2,900, noting that the current valuation presents a compelling purchasing opportunity. The analysts argued that the market undervalues the company's commercial potential, with increased price competition fears and perceived dimming prospects having led to multiple compression.

The analysts suggested that as AutoZone proves its capability to manage these risks, a rally in its shares is likely. They forecasted a resurgence in the company's DIFM growth and a steady DIY growth against the unstable macroeconomic backdrop, ultimately prompting a return to a premium valuation multiple of 19x, implying approximately 30% upside potential to the current price.

AutoZone (NYSE:AZO) shares plunged nearly 6% on Tuesday after the company reported a slowdown in comparable sales, mainly because of the weak demand in March.

Q3 EPS was $34.12, compared to the Street estimate of $31.41. Revenue came in at $4.09 billion, compared to the Street estimate of $4.12 billion.

Domestic comp store sales growth tracked below expectations at 1.9% (vs. Street estimate of 4.1%), reflecting the impacts of weather-related disruptions in March and below-plan commercial sales growth.

While the company does not provide formal financial guidance, management maintained its expectations for double-digit growth in its commercial segment, though returning to such levels could take one or two quarters.