Truist raises AutoZone stock price target to $3,841

On Wednesday, Truist Securities adjusted its outlook on AutoZone shares (NYSE: NYSE:AZO), raising the price target to $3,841 from the previous $3,753, while reaffirming a Buy rating on the stock. Currently trading at $3,473, the stock sits near its 52-week high of $3,563, with analyst targets ranging from $2,750 to $4,064. According to InvestingPro analysis, the company appears to be trading above its Fair Value, suggesting careful consideration for new positions. The adjustment follows AutoZone’s recent performance, which included a modest improvement in domestic comparable sales trends and a notable acceleration in Commercial sales, which increased by 7.3%. With a market capitalization of $58.3 billion and trailing twelve-month revenue of $18.7 billion, AutoZone maintains its position as a prominent player in the Specialty Retail industry. InvestingPro data reveals the company’s impressive gross profit margin of 53.1%, demonstrating strong operational efficiency.

Analysts at Truist Securities attribute the positive momentum in part to organic improvements within the company. They also suggest that the implementation of tariffs could lead to significant inflation on the same stock keeping units (SKUs), with minimal negative impact on unit sales. This inflation is expected to help comparable sales accelerate, particularly as higher tariffs may increase vehicle prices, making affordability an issue and, consequently, encouraging more repair and maintenance activities.

Despite the short-term profit drag from growth investments and foreign exchange (FX) fluctuations, Truist Securities believes that the improved organic comparable sales, coupled with the potential substantial tailwinds from tariffs, are central to AutoZone’s narrative. The firm maintains a bullish stance on the stock, encouraging investors to continue buying. InvestingPro subscribers have access to 12 additional exclusive ProTips and a comprehensive Pro Research Report, offering deeper insights into AutoZone’s financial health, which currently rates as "GOOD" with particularly strong profitability metrics.

The analyst’s commentary highlighted the quarter’s solid performance and the modest improvement in domestic trends, which exceeded their estimates, including the surge in Commercial sales. They also noted the potential for tariffs to boost comparable sales substantially by increasing same SKU inflation, with little negative impact on unit sales, as higher tariffs could raise vehicle prices and, in turn, boost repair and maintenance activity.

AutoZone’s focus on growth investments and the challenges presented by FX were acknowledged as short-term drags on profit. However, the analysts emphasized the importance of the improved organic comparable sales and the potential significant benefits from tariffs, which they believe are key factors in the company’s ongoing story.

In other recent news, AutoZone reported its second-quarter fiscal year 2025 results, 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, analysts from Raymond (NSE:RYMD) James and BMO Capital Markets remain optimistic, with Raymond James increasing AutoZone’s stock target to $4,000 and maintaining a Strong Buy rating, and BMO Capital raising its target to $3,850 with an Outperform rating. DA Davidson also adjusted its price target to $3,500, citing AutoZone’s resilience in a volatile market.

The company’s strategy includes expanding its Mega-Hub stores to enhance product availability, particularly benefiting the do-it-for-me (DIFM) market segment. AutoZone plans to open approximately 100 new international stores this year, although foreign exchange rates pose a short-term challenge. Analysts note that AutoZone’s ability to pass on cost increases to consumers is a significant advantage, especially amid potential tariff impacts.

AutoZone’s management remains optimistic about their strategies to expand market presence, with expectations for stronger performance in the second half of fiscal year 2025. The company continues to invest in growth initiatives, including new store openings and distribution centers, aiming to capitalize on structural growth opportunities and return value to shareholders.

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