BMO Capital Hikes AutoZone Price Target to $4,100, Affirms Outperform Stance
AutoZone, Inc. (NYSE:AZO) is well-positioned to continue edging higher. That's the sentiment echoed on May 27 by BMO Capital as the firm reiterated an Outperform rating on the stock. Additionally, the analyst firm hiked its stock price target to $4,100 from $3,850.
An engineer at a workbench surrounded by automotive parts, tools, and microchips.
The stock has gained 13%, outperforming the S&P 500, which is up by nearly 1%. The impressive runs stem from AutoZone's strong performance over the past year, characterized by a 32% return. In addition, it boasts a healthy gross profit margin of 53.13% and a free cash flow of over $2 billion.
Tristan Thomas-Martin of BMO Capital shared insights on the automotive parts company's latest performance and its future outlook. Autozone delivered impressive third-quarter fiscal 2025 results as the company's international business continues to deliver strong results. The results also came in better than expected, attributed to the company's aggressive expansion. The company opened 54 new stores in the US, 25 in Mexico, and five in Brazil.
Revenue in the third quarter was up 5.4% to $4.5 billion. Same-store sales were up 3.2%, driven by a 5.0% increase in domestic sales as international same-store sales grew by 8.1%. However, net income fell by 6.6% to $608.4 million, and diluted earnings per share shrunk by 3.6% to $35.36.
Thomas-Martin acknowledged challenges affecting AutoZone's margins, including commercial sales growth, currency headwinds, and ongoing investments. Despite this, he remains optimistic about the company's long-term market potential in a fragmented industry.
AutoZone is a specialty retailer that deals in automotive replacement parts and accessories. It offers a wide variety of hard parts, maintenance items, accessories, and non-automotive products. In addition to their retail stores, AutoZone also provides commercial sales to repair shops and other businesses.
While we acknowledge the potential of AutoZone, Inc. (NYSE:AZO) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than AZO and that has 100x upside potential, check out our report about the cheapest AI stock.
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