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On Friday, TD Cowen analysts, led by Max Rakhlenko, increased their price target on O'Reilly Automotive (NASDAQ:ORLY) shares to $1,400 from $1,375, while reiterating a Buy rating on the stock. Currently trading at $1,215.81 with a market capitalization of $70.2 billion, InvestingPro data indicates the stock is trading above its Fair Value. The firm's positive outlook is based on the company's potential for market share growth within the Do-It-For-Me (DIFM) sector in 2025.
According to Rakhlenko, both O'Reilly and AutoZone (NYSE:NYSE:AZO) are in a strong position to expand their market share in the coming years. Specifically, O'Reilly is highlighted as TD Cowen's top pick in the Auto Aftermarket category and third overall.
The firm's confidence in the company stems from its consistent performance and ability to outpace competitors in market share acquisition. InvestingPro analysis supports this view, showing strong financial health with a 51.2% gross profit margin and robust revenue growth of 5.25% over the last twelve months.
The updated earnings per share (EPS) estimate for the fourth quarter has been adjusted to $9.94, reflecting a revised comparable store sales (comps) growth projection of 3.2%. Despite the optimism, TD Cowen also acknowledges the possibility of a slower year in 2025, with the expectation that O'Reilly's management might set the fiscal year 2025 comps guidance between 2% and 4%, which is slightly below the usual range of 3% to 5%.
Weather patterns are expected to play a role in the company's performance, potentially acting as a benefit in the first quarter but posing challenges in the second quarter. Each month through July is forecasted to be colder compared to the previous year, which could impact business.
A significant development for O'Reilly is the opening of a new distribution center (DC) in Virginia, which is set to enhance the company's presence in the mid-Atlantic region. While the full expansion of its logistics network will take several years, the analysts believe O'Reilly is well-prepared to begin gaining market share swiftly.
The raised price target to $1,400 is based on a 27 times multiple of the firm's forecasted $51.72 EPS for the fiscal year 2026. This adjustment reflects TD Cowen's confidence in O'Reilly's strategic positioning and its future growth prospects in the auto parts industry. With a current P/E ratio of 29.97 and strong return metrics, investors seeking deeper insights into O'Reilly's valuation and growth potential can access comprehensive analysis through InvestingPro's detailed research reports, which include over 30 additional financial metrics and expert insights.
In other recent news, O'Reilly Automotive has been the subject of several major developments. The company recently announced a $2 billion increase in its share repurchase program, bringing the total authorization to $27.75 billion. This is seen as a strategic move to manage the company's capital structure and potentially increase shareholder value. In earnings, O'Reilly Automotive reported Q3 earnings per share (EPS) of $10.55, slightly missing estimates, and revised its 2024 guidance downward, expecting EPS between $40.60 and $41.10.
Analysts continue to show confidence in the company. BMO Capital initiated coverage on O'Reilly Automotive with an Outperform rating and a price target of $1,400.00, emphasizing the company's advantageous position in the automotive market. Other firms such as Roth/MKM, Mizuho (NYSE:MFG), Truist Securities, TD Cowen, UBS, and Jefferies have also maintained or raised their price targets for the company.
O'Reilly Automotive has also been expanding its geographic footprint, opening 47 new stores in Q3, bringing the total to 111 for the year. The company's executives have indicated a readiness to pass tariff costs to consumers and have noted a reduction in reliance on Chinese suppliers. These are among the recent developments at O'Reilly Automotive.
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