AutoZone Analyst Moves To Sidelines As Pandemic Cripples Demand

The COVID-19 pandemic is casting a pall over companies across sectors, and auto parts retailers are no exception.

AutoZone, Inc. AZO has lost its attractiveness due to the specter of demand slowdown and a relatively less attractive valuation, according to an analyst at BofA Securities.

The AutoZone Analyst

Elizabeth Suzuki downgraded the rating on AutoZone shares from Buy to Neutral and lowered the price target from $1,070 to $950.

The AutoZone Thesis

Medium-term auto parts replacement demand faces mounting risks, Suzuki said in a Wednesday downgrade note. (See her track record here.)

Demand for auto parts is less likely to be pent-up than lost altogether, the analyst said.

BofA lowered its 2020 revenue forecast for AutoZone from $1.07 billion to $950 million, for 2021 from $12.59 billion to $12.25 billion and for 2022 from $13.05 billion to $12.7 billion.

The suspension of share repurchases will also impact the bottom line, Suzuki said.

BofA also sees AutoZone's valuation as relatively less attractive versus peers.

Yet AutoZone is a long-term survivor, the analyst said.

"As the largest retail chain of aftermarket auto parts, we expect AutoZone to ultimately be a market share taker at the expense of small independent retailers that still comprise the majority of the almost $300-billion market in the U.S."