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Time To Get In The Zone, AutoZone Stock

By MarketBeat. Originally published at ValueWalk.

AutoZone worst performing large cap stocks in March 2022

If there ever was a company that could benefit from a stock split, AutoZone, Inc. (NYSE:AZO) may be it. The auto parts and accessories retailer has never done a split throughout its 30-year history even in light of the stock’s sharp rise.

Still, the $2,000 share price shouldn’t cause sticker shock for investors looking to jump start long-term portfolio growth. After posting record revenues for the 23rd straight year in 2021, AutoZone sits in the driver’s seat of an industry expected to see strong demand over the next few years. Similar to the aging population theme, our cars aren’t getting any younger.


Q4 2021 hedge fund letters, conferences and more

So while auto manufacturers are being slowed by ongoing supply chain disruptions, AutoZone is benefitting from consumers looking to squeeze more miles out of their vehicles. The company’s vast assortment of all things auto parts and omni-channel sales strategy should keep its stock revving higher.

How Did AutoZone Perform in 2021?

AutoZone’s 77% return last year was a reflection of some stellar financial results. The company grew earnings per share (EPS) 32% on sales of more than $14.6 billion. The top line result represented 16% year-over-year growth, so the fact that EPS growth was twice that shows margins are healthy and costs are being well managed.

It also extended AutoZone’s streak of record sales to 23 years, an accomplishment that bears much praise given the ups and downs of the auto industry—not to mention the pandemic challenges it has faced. Management expects to keep the streak alive in the current fiscal year due to momentum in both the do-it-yourself (DIY) and commercial businesses.

How does AutoZone build off its strong performances year after year? It has much to do with simply providing more products through more channels. An expansion of its parts availability and service offerings is a constant goal. This allows it to be a valuable cog in the auto cycle for so many American and international drivers.

What are AutoZone’s Growth Drivers?

AutoZone exited fiscal 2021 with 6,051 brick-and-mortar locations across the U.S., Mexico, and Brazil. This store count was 10.5% lower than three months prior, a reflection of the company’s shift to e-commerce rather than slow customer traffic.

Online sales will be the main growth engine for AutoZone as it looks to capture consumer demand for car, SUV, and truck parts, maintenance products, and services. In addition to its main autozone.com website, it caters to the commercial market through autozonepro.com. Lately, the domestic commercial segment has been a key growth contributor due to the popularity of Alldata diagnostic and repair software subscriptions and its parts delivery service to local garages.

In the DIY segment, an improved online look, next-day delivery, and in-store pickup will continue to make AutoZone a go-to destination. Consistent with the trend in other areas of retail, private label brands are the earnings growth drivers here. The Duralast and Valucraft lines are among AutoZone’s best sellers and, due to their high margins, a big part of what is driving double digit EPS growth.

Is it a Good Time to Buy AutoZone Stock?

AutoZone is trading a mere 4% from its all-time high of $2,110 established during the final week of 2021. Even though it has quadrupled over the past five years, the valuation remains reasonable if not cheap. At 18x trailing earnings, the stock is well below the S&P 500 trailing P/E ratio of 26x. Given the company’s growth metrics, this by itself makes it a buy.

What also makes it a buy is the perennial support the stock gets from the company’s share repurchase programs. Since 1998, AutoZone has bought back nearly 90% of its outstanding shares, another impressive streak that is bound to support the stock’s uptrend. After buying back $3.4 billion of its stock in fiscal 2021, an additional $958 million remains in the current program.

AutoZone has also consistently received support from the 50-day moving average on its daily chart. Over the past year, 5% to 10% dips have proven to be buy opportunities for a stock that has the wind at its back. The current dip will likely be no exception.

Wall Street analysts continue to be bullish on AutoZone. Last week Argus Research upgraded the stock to buy, noting the retailer has beat consensus earnings estimates for seven consecutive quarters. The firm also cited the relatively late stage of the vehicle age cycle as being supportive of underlying demand.

It’s hard to fork over $2,000 for a new car battery, but in the long-run it proves to be a good investment. The same goes for the growth engine that is AutoZone stock. It appears to have plenty left in the tank.

Should you invest $1,000 in AutoZone right now?

Before you consider AutoZone, you’ll want to hear this.

MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and AutoZone wasn’t on the list.

While AutoZone currently has a “Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

Article by MarketBeat

Updated on

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