Goldman Cuts AutoZone (AZO) to Sell Citing Valuation, Sectorwide Bearishness; Likes AAP, ORLY More
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Price: $2,957.95 -0.14%
Rating Summary:
30 Buy, 10 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
30 Buy, 10 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Goldman Sachs analysts downgraded shares of AutoZone Inc. (NYSE: AZO) from Neutral to Sell this morning, saying, in addition to a now-appropriate valuation, that its lowered investment rating is a sector-relative call.
Despite the downgrade, the Goldman analysts noted that AutoZone remains one of the best firms that they cover, with the highest financial returns and an aggressive buyback program. Goldman increased its price target on the stock from $211 to $213.
“The slight tick up in our price target reflects a resetting of our base-case valuation assumption to reflect a modest increase in the market multiple,” the Goldman report said on Monday.
The analysts see the auto-parts retailer reporting solid quarterly results on September 21, with upside to its 4 percent same store sales growth forecast. Goldman maintained its quarterly earnings estimate of $5.40 per share.
“An early and updated focus on systems and an audacious private label merchandising program have combined to drive the highest operating margins in hardlines, and some of the best financial returns in retailing. Moreover, the sector has benefited from robust tailwinds as sluggish new car sales have increase consumers’ focus on maintenance and refurbishment of aging automobiles, and a difficult economy has led to growth in AZO’s core demographic – consumers who fix their own cars out of economic necessity.”
Within the auto-parts sector and in light of Goldman's long-term bullishness on AZO, the firm sees better value in Advance Auto Parts Inc. (NSYE: AAP) and O’Reilly Automotive Inc. (NASDAQ: ORLY).
Shares of AutoZone are down $1.43 to $216.47 this afternoon.
Despite the downgrade, the Goldman analysts noted that AutoZone remains one of the best firms that they cover, with the highest financial returns and an aggressive buyback program. Goldman increased its price target on the stock from $211 to $213.
“The slight tick up in our price target reflects a resetting of our base-case valuation assumption to reflect a modest increase in the market multiple,” the Goldman report said on Monday.
The analysts see the auto-parts retailer reporting solid quarterly results on September 21, with upside to its 4 percent same store sales growth forecast. Goldman maintained its quarterly earnings estimate of $5.40 per share.
“An early and updated focus on systems and an audacious private label merchandising program have combined to drive the highest operating margins in hardlines, and some of the best financial returns in retailing. Moreover, the sector has benefited from robust tailwinds as sluggish new car sales have increase consumers’ focus on maintenance and refurbishment of aging automobiles, and a difficult economy has led to growth in AZO’s core demographic – consumers who fix their own cars out of economic necessity.”
Within the auto-parts sector and in light of Goldman's long-term bullishness on AZO, the firm sees better value in Advance Auto Parts Inc. (NSYE: AAP) and O’Reilly Automotive Inc. (NASDAQ: ORLY).
Shares of AutoZone are down $1.43 to $216.47 this afternoon.
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