TD Cowen reiterates Buy rating and $4,300 target on AutoZone stock

On Wednesday, TD Cowen analysts reiterated their Buy rating for AutoZone (NYSE:AZO) stock, maintaining a price target of $4,300. Currently trading at $3,748 and near its 52-week high, AutoZone commands a market capitalization of $62.7 billion. The decision reflects the firm’s confidence in AutoZone’s ability to navigate challenges related to tariffs and its reliance on the Chinese market. According to InvestingPro analysis, the company’s current valuation appears rich relative to its near-term earnings growth potential.

The analysts noted that AutoZone’s scale, bargaining power, technological capabilities, and pricing strategies are expected to help the company mitigate risks. With a robust gross margin of 53.13% and revenue growth of 4.72% over the last twelve months, this approach is anticipated to contribute to stronger revenues and stable margins. AutoZone is employing a similar strategy to what it used in 2017 and 2018 to successfully counteract tariff impacts.

Key components of AutoZone’s strategy include negotiating costs with vendors, diversifying its supply chain outside of China, and passing on any remaining costs to consumers in a disciplined manner. Management anticipates incremental price increases in the low to mid-single digits in the near term, with the possibility of further adjustments in the future.

Despite potential pressures on discretionary categories, the analysts highlighted the industry’s break-fix nature, which accounts for 85% of AutoZone’s revenue. This non-discretionary demand is expected to result in low price elasticity, allowing the company to maintain its product margins.

In other recent news, AutoZone has been the focus of several key developments. The company announced the appointment of Constantino Spas Montesinos to its Board of Directors, expanding its board to 11 members. This move is part of AutoZone’s strategy to enhance its leadership as it continues to grow its store count, which currently stands at 7,516 across the U.S., Mexico, and Brazil. Analysts have been active in revising their outlooks on AutoZone, with TD Cowen maintaining a Buy rating and a $4,300 price target, citing strong domestic sales growth despite some margin pressures. UBS also raised its price target to $4,260, pointing out that AutoZone’s strategic investments are already yielding positive returns. Guggenheim increased its price target to $4,100, highlighting the company’s domestic sales acceleration and strategic expansions, including the opening of more mega hub locations. Raymond (NSE:RYMD) James lifted its target to $4,200, maintaining a Strong Buy rating, and noted the company’s positive sales momentum and strategic investments. These analysts’ updates reflect a general confidence in AutoZone’s ability to navigate current challenges and capitalize on future growth opportunities.

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