On Tuesday, AutoZone, Inc. (NYSE:AZO) received a positive outlook from Mizuho Securities as the firm initiated coverage on the automotive parts retailer with a Buy rating and a price target set at $3,450. The new coverage highlights AutoZone's foray into the expansive U.S. commercial parts market, which is valued at over $90 billion and where AutoZone currently holds approximately a 5% share.
Mizuho Securities anticipates an additional $2-3 billion revenue opportunity for AutoZone in the medium-term, particularly as one of its main competitors, Advance Auto Parts (NYSE:AAP), faces challenges. The firm believes that AutoZone's established presence in the Do-It-Yourself (DIY) sector will continue to be a significant and sustainable driver of earnings for the company.
The analyst from Mizuho Securities also pointed out the potential for margin improvements due to the retention of recent price increases. Additionally, the firm sees international expansion as a new avenue for growth for AutoZone. The analyst expects that these factors, combined with what is described as one of the most effective stock repurchase programs in the consumer sector, will lead to a revaluation of the company's stock.
AutoZone's strategy and market position have led Mizuho Securities to prefer the company over other players in the auto parts industry.
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