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AutoZone (NYSE:AZO) gained on Monday after Evercore ISI pushed up its rating on the auto retailer to an Outperform rating from Market Perform. The general view is that AutoZone (AZO) is positioned for profitable share gain, and stable margins in a relatively favorable auto aftermarket.
Analyst Greg Melich and team said they see the recent share price decline for AZO as presenting an attractive entry point for investors into an industry leader in a favored auto aftermarket retail sub sector.
“While we do not anticipate an immediate return to double digit DIFM growth, we believe that high single digits is attainable near term with potential for a re-acceleration over time.”
The firm thinks a high single digit increase in commercial growth should be enough to drive same store sales to around 3% with margins recovering following several years of price investment. Some of the overall industry factors working in the favor of AZO are noted to be the record age of vehicle fleet, the above average level of inflation, rising miles driven in the U.S., and favorable consumer trade down positioning relative to still elevated used/new vehicle prices with credit tightening.
Evercore ISI’s base case price target of $2,700 works out to 17.5X the 2024 EPS estimates.
Shares of AutoZone (AZO) were up 1.99% at 12:05 p.m. on Monday. The auto retail stock trades below its 50-day, 100-day, and 200-day moving averages.
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