Why This AutoZone Analyst Is Turning Bullish

AutoZone, Inc. AZO management issued guidance for the first time in around five years, and it's a positive signal for the fiscal first quarter and the full fiscal year 2021, according to Raymond James.

The AutoZone Analyst: Matthew McClintock upgraded AutoZone from Outperform to Strong Buy and raised the price target from $1,500 to $1,565.

The AutoZone Thesis: While the recent management commentary bodes well for investors focused on the near-term, those with a longer-term horizon can consider the strong upside opportunities to comps and earnings growth driven by the company’s “increasingly proven commercial (DIFM) growth,” McClintock said in an upgrade note.

“After more than five years of long-term investments in the DIFM business, AZO began to deliver outstanding growth and returns for this segment over a year ago, which was only further demonstrated by recent results,” the analyst said. 

"We firmly believe that market consolidation opportunities in a post COVID world should only increase our pre COVID expectations for growth in this segment."

Both near-term and long-term AutoZone investors should consider share buybacks, “because we simply just don't see negative earnings revisions on the horizon regardless if we are wrong on the fundamental points above,” he said. 

AZO Price Action: Shares of AutoZone were trading 0.46% higher at $1,169.89 at last check Wednesday.

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