On Wednesday, UBS adjusted its price target for AutoZone (NYSE:AZO) shares, listed on the New York Stock Exchange under the ticker NYSE:AZO, to $3,340 from the previous target of $3,465. Despite this change, the firm has kept a Buy rating on the automotive parts retailer's stock.
AutoZone has demonstrated resilience by achieving high-single digit earnings growth despite a challenging quarter marked by adverse weather conditions, deflation, delayed tax refunds, and ongoing macroeconomic pressures.
UBS acknowledges the concerns of some investors who are wary that AutoZone may be approaching the limits of its ability to sustain double-digit earnings per share (EPS) growth. These concerns are due to difficulties in gaining commercial market share and diminishing gross margin benefits.
However, UBS remains optimistic about AutoZone's prospects, citing the company's acceleration of its mega hub rollout and various strategies to maintain profitability. The firm also notes the potential for modest acceleration in commercial growth and contributions from international markets, which could lead to at least low single-digit overall comparable store sales growth.
Furthermore, UBS points out that if AutoZone's stock price were to decline, the company's share repurchase program could become more accretive, adding further value. The combination of these factors leads UBS to conclude that the positive aspects should override the negative concerns.
InvestingPro Insights
In light of UBS's updated price target for AutoZone, current data from InvestingPro provides additional context for investors considering AZO stock. With a market capitalization of $48.81 billion and a P/E ratio standing at 22.34, AutoZone shows significant market presence and valuation metrics that investors should weigh. The company's adjusted P/E ratio for the last twelve months as of Q2 2024 is 18.62, reflecting a more favorable valuation compared to the current P/E ratio.
InvestingPro Tips highlight that AutoZone's management has been actively repurchasing shares, which could signal confidence in the company's value and prospects. Additionally, the stock is currently in oversold territory according to the RSI, suggesting potential for a rebound. However, investors should note that six analysts have revised their earnings estimates downwards for the upcoming period, which may impact short-term performance.
For those seeking comprehensive analysis, InvestingPro offers additional insights, with a total of 12 InvestingPro Tips available for AutoZone. Interested readers can unlock these valuable tips and make more informed decisions by subscribing to InvestingPro, and can benefit from an extra 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.