| Stock | Price | 52 Week Range | Marketcap | EPS | Dividend Yield | Chart (24H) | Sector | Employees | Last Updated |
|---|---|---|---|---|---|---|---|---|---|
| $4,158.10 | 69.56B | 147.81 | 0.00% | Consumer Cyclical | 75,600 | 6 hours ago | |||
| $104.00 | 88.24B | 2.79 | 0.00% | Consumer Cyclical | 93,419 | 6 hours ago | |||
| $25.00 | 2.55B | 0.66 | 3.34% | 0 | 4 years ago | ||||
| $56.56 | 3.39B | 10.00 | 1.78% | Consumer Cyclical | 33,200 | 6 hours ago | |||
 Walmart Inc. WMT | $102.57 | 818.55B | 2.34 | 0.93% | Consumer Defensive | 2,100,000 | 6 hours ago | ||
| $98.69 | 44.84B | 9.10 | 4.27% | Consumer Defensive | 440,000 | 6 hours ago |
For investors keen to find stable yet rewarding opportunities, AutoZone Inc. (NYSE: AZO), a leading auto-parts retailer, poses an interesting proposition. The question is, should you buy AutoZone stock now? We’ll weigh three compelling reasons to invest against three potential drawbacks to help you decide if AZO deserves a spot in your portfolio.
AutoZone’s capability of consistent performance is evident through its latest financial results. The company reported a 4.5% increase in revenue, reaching $2.21 billion, and a 7% rise in earnings to $265.6 million ($7.27 per share). These solid financials exceed analyst expectations and demonstrate the company’s operational efficiency and strong market presence. Notably, AutoZone has achieved 27 consecutive quarters of double-digit earnings growth – an impressive feat that underscores its stable profitability and solid operational footing.
While investors appreciate reliable performance, AutoZone’s stock isn’t just steady—it has also delivered significant returns. The stock has improved by 18% year-to-date and averaged 30% gains over the past three years, proving that slow and steady can indeed win the race.
Editor’s Note: Analysis and insight for this article were originally sourced sourced from our friends at InvestorPlace
One of AutoZone’s strongest assets is its extensive network of 4,767 stores spanning across 49 states. This massive footprint ensures that the company has a far-reaching presence and significant market penetration. But it doesn’t stop there. The company leverages big data systems for optimal inventory management, ensuring that store shelves are stocked with the right products at the right time. These sophisticated data analytics systems evaluate community demographics, buying habits, and sales trends, which help AutoZone maintain an efficient supply chain and high customer satisfaction. This investment in digital infrastructure places AutoZone in a strong competitive position, enabling it to efficiently meet customer demand while minimizing operational costs.
AutoZone is not just satisfied with leading the domestic market; it has its eyes set on international expansion as well. The company has strategically targeted Mexico, where it currently operates 341 stores. Even more exciting are AutoZone’s plans for growth in Brazil, with the potential to add 10-15 stores in the next few years. The international markets are relatively fragmented and underdeveloped in comparison to the U.S., presenting a ripe opportunity for AutoZone to establish its dominance and achieve significant growth outside its home turf. This methodical approach to global growth allows AutoZone to leverage its established supply chain advantages and brand reputation to new markets with substantial growth potential.
Despite modest revenue growth, AutoZone’s solid margins reflect its efficient cost management and strategic positioning. The company’s earnings growth – 27 consecutive quarters of double-digit increases – is a testament to its robust profitability mechanics. AutoZone’s introduction of private-label products such as EconoCraft, ValuCraft, and Duralast plays a major role in enhancing its margins. These products typically offer higher profitability than third-party brands. Moreover, AutoZone has been innovative in its inventory strategies, reducing the cash tied up in unsold stock and thereby improving overall financial health.
AutoZone’s business model faces inherent risks due to secular changes. One significant headwind is the increasing sales of new vehicles in the U.S., which naturally suppresses the demand for aftermarket auto parts. As new cars come with better technology and more durable parts, the replacement cycles are extended, further reducing the frequency with which consumers need aftermarket parts. This could dampen AutoZone’s market over the long term.
The auto-parts retail sector is fiercely competitive, and AutoZone operates in a landscape teeming with formidable rivals. Primary competitors such as O’Reilly Automotive (ORLY), Pep Boys (PBY), and Advance Auto Parts (AAP) constantly pressure AutoZone’s market share. These firms have not only adopted some of AutoZone’s best practices but remain aggressive in their pricing strategies. Additionally, peripheral competition from big-box retailers like Walmart (WMT) and Target (TGT) adds another layer of challenge. These companies often compete on price, posing a significant threat to AutoZone’s ability to maintain its margins and customer loyalty.
In the modern retail landscape, a robust digital strategy is not just beneficial—it is essential. Unfortunately, this is where AutoZone lags. Currently, e-commerce accounts for only 3.5% of its total sales, indicating a significant area of potential growth that remains untapped. While the acquisition of AutoAnything.com is a step in the right direction to bolster its e-commerce capabilities, additional investments in research and development will be necessary to fully capture the online market. This could be a costly and time-consuming endeavor. To keep pace with competitors who are already ahead in the digital race, AutoZone will need to rapidly scale its online business.
| Information | Value |
|---|---|
| Consensus Rating | Buy / Moderate Buy |
| Average Price Target | $3,199.94, $3,112.88 |
| Current Price | $2,876.93 |
| Potential Gain | 11.23%, 10.93% |
| Number of Ratings | 19, 19 |
Analysts forecast a strong performance for AutoZone, with the majority recommending Buy or Moderate Buy ratings. The average price target suggests a significant potential gain for the stock. The company has consistently outperformed its industry over the past year, indicating robust financial health and growth prospects. Additionally, analysts continue to provide positive ratings and price targets, reflecting their confidence in the stock’s future performance.
AutoZone’s legacy of consistent double-digit earnings growth, extensive retail footprint, and smart international expansion strategy make it a compelling investment prospect. The company’s ROIC of 32.3% and balanced short-term and long-term growth strategies further bolster its investment appeal. Despite competition and the need for a more robust digital strategy, AutoZone’s strengths appear to outweigh its weaknesses, making it a stock worth considering at 13 times forward earnings.
In essence, if you are an investor looking for a reliable, steady growth opportunity with proven financial performance, AutoZone should be on your radar. Its solid financials and strategic initiatives position the company well for future growth, making it a worthy investment in a competitive market.