AutoZone's Solid Q1 Beat & Industry Fundamentals Trigger 4% Price Target Boost By This Analyst

Raymond James analyst Bobby Griffin reiterated an Outperform rating on the shares of AutoZone AZO and raised the price target from $2,500 to $2,600.
The analyst said AutoZone's first-quarter FY23 EPS was solidly above expectations.
On a one-year and three-year stack basis, AZO's comps were impressive across the entire 12-week quarter, increasing mid-single digits and 31.5%, respectively, for each of the four-week periods.
Gross margin rate decreased 240 basis points y/y to 50.1% in 1Q23, which was ~20 basis points above the consensus view.
The analyst expects DIFM growing as a percentage of sales to be the primary driver of gross margin headwind moving forward.
However, the rate of increase in the DIFM business should start to slow some as comparisons become tougher, abating some margin pressure, the analyst added.
LIFO was an $81 million headwind in 1Q23, and this pressure is expected to slow to a roughly $40 million headwind in 2Q23.
The analyst believes this pressure (albeit non-cash) should abate further in 2H23, given certain freight costs have been easing of late.
The analyst said the risk/reward balance remains favorable, given AZO's DIFM momentum and improving parts availability position it exceptionally well to gain market share.
Price Action: AZO shares are trading higher by 0.86% at $2,478.16 on the last check Wednesday.
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