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On Wednesday, Raymond (NSE:RYMD) James analyst Bobby Griffin increased the price target on AutoZone (NYSE:AZO) shares to $4,000 from the previous target of $3,850, while maintaining a Strong Buy rating on the stock. Currently trading at $3,473.66, the stock sits near its 52-week high of $3,563.57, reflecting strong market confidence. According to InvestingPro data, AutoZone commands a substantial market capitalization of $58.3 billion.
Griffin’s updated assessment came after AutoZone reported its second-quarter fiscal year 2025 results, which reaffirmed the firm’s confidence in the company’s growth trajectory. Despite a slight adjustment to the fiscal year 2025 earnings per share (EPS) estimate, now expected to grow by 2% year-over-year compared to the earlier forecast of 3%, the analyst remains optimistic about AutoZone’s commercial momentum and robust gross margins. InvestingPro data shows impressive fundamentals, with a gross profit margin of 53.13% and revenue growth of 4.72% over the last twelve months.
The expansion of AutoZone’s Mega-Hub stores is a central component of its strategy, with the company aiming to increase the number to 300. This expansion is set to enhance product availability for both the do-it-yourself (DIY) and do-it-for-me (DIFM) market segments. The DIFM sales are particularly strong, driven by better inventory placement and faster delivery times, and are anticipated to continue improving sequentially year-over-year throughout fiscal year 2025.
Although DIY traffic has been challenged due to a decrease in discretionary spending, Griffin notes that postponed maintenance is not a sustainable trend, positioning AutoZone favorably for a potential uptick as economic conditions become more favorable. Additionally, the possibility of reaccelerated inflation and tariff impacts could provide a further boost to the average ticket size.
AutoZone’s international business is another area of growth, with plans to open approximately 100 new stores within the year. However, foreign exchange rates are currently posing a short-term challenge. Overall, Griffin concludes that AutoZone remains aligned with Raymond James’ investment thesis, which emphasizes the company’s structural growth opportunities, disciplined execution, and commitment to returning value to shareholders. Based on InvestingPro’s Fair Value analysis, AutoZone appears to be trading above its Fair Value. For deeper insights, including 12 additional ProTips and comprehensive financial analysis, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, AutoZone reported its financial results for the second quarter of fiscal year 2025, revealing a slight miss on earnings per share (EPS) forecasts but exceeding revenue expectations. The company posted an EPS of $28.29, falling short of the anticipated $29.06, while revenue reached $4 billion, surpassing the forecasted $3.98 billion. Despite the EPS miss, AutoZone’s stock target was raised by BMO Capital to $3,850, maintaining an Outperform rating, reflecting confidence in the company’s growth strategies. BMO Capital adjusted its fiscal year 2025 earnings estimates downward but increased projections for fiscal year 2026, citing expectations for accelerated market share gains.
AutoZone’s domestic same-store sales grew by 1.9%, and international same-store sales surged by 9.5% on a constant currency basis. The company plans to open approximately 100 international stores this fiscal year and invest over $1 billion in capital expenditures. Continued expansion with new stores and distribution centers is part of AutoZone’s strategy to enhance its market presence. Analysts from BMO Capital noted that AutoZone’s management remains optimistic about their strategies to expand market share, particularly within the do-it-yourself (DIY) and commercial sales segments. The company faces challenges from foreign exchange rates and tariffs but aims to counterbalance these through strategic pricing and consistent demand for maintenance and repair services.
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