UPDATE: Raymond James Downgrades AutoZone (AZO) to Outperform
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Raymond James analyst Matthew McClintock downgraded AutoZone (NYSE: AZO) from Strong Buy to Outperform with a price target of $1,750.00 (from $1,700.00).
The analyst comments "Our downgrade reflects: 1) current valuation that does not offer sizable multiple re-rating potential in the coming months (stock is now 4% below our prior price target), 2) challenging comp sales comparisons (more so than AAP and ORLY) due to greater DIY mix at 78% (compared to AAP/ ORLY's 43/41%), and 3) lingering headline risk associated with pricing investments (commentary could further discourage some investors). While we understand the aforementioned concern given the benign pricing environment this sector is known for, we believe the incremental pricing investments should be viewed as transitory. We expect DIFM growing as a percentage of sales to be the primary driver of gross margin pressure going forward, which is to be followed by some headwinds on incremental pricing investments on the DIFM side through F2Q22 (early 2022). We remain mindful that inventory availability is historically the number one factor when pro garages consider making a purchase, not pricing."
Shares of AutoZone closed at $1622.16 yesterday.
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