Morgan Stanley raises price target for AutoZone shares by Investing.com

On Wednesday, Morgan Stanley showed confidence in AutoZone (NYSE: NYSE:) as the investment bank raised its price target on the company’s stock to $3,125 from $3,038. It maintained an “Overweight” rating on the auto parts retailer. The new price target suggests moderate upside potential from current trading levels.

Morgan Stanley’s outlook for AutoZone is based on the stock’s favorable risk-reward profile. In their analysis, they outline potential upside and downside scenarios. In the optimistic scenario, they see an upside potential of about 34% to a price target of $4,070, while in the pessimistic scenario, there is a downside potential of about 24% to $2,300. The revised price target itself represents an increase of about 3% from the original target.

The investment bank considers AutoZone’s valuation, which is approximately 18.5 times the expected price-earnings ratio (P/E) for the next twelve months, to be reasonable. This valuation is not considered excessive, especially for a company in a defensive sector. Morgan Stanley expects AutoZone to return to normalized sales growth in the medium term.

AutoZone is recognized by Morgan Stanley as a solid value creator with the potential to gain further market share in its home market. In addition, the bank sees opportunities for AutoZone to enter international markets, which they refer to as “white space.” This strategy could further support the company’s growth momentum in the coming years.

In other recent news, AutoZone has seen a number of adjustments to its price targets by various research firms. Citi lowered the price target to $3,500 but maintained a buy rating after fiscal fourth-quarter results missed expectations on both revenue and earnings. CFRA instead raised its price target on AutoZone to $3,300 and also maintained a buy rating. Evercore ISI and TD Cowen maintained their positive ratings on AutoZone, while Barclays maintained an overweight rating on the company.

AutoZone reported an 11% increase in earnings per share for the quarter ended August, but missed consensus estimates. The company’s revenue rose 9% to $6.21 billion. Despite challenges in the auto parts retail sector, research firms such as Evercore ISI, BofA Securities, JPMorgan and Truist Securities continue to express confidence in the company’s profitability and potential for future sales growth.

In a strategic move, AutoZone selected Kenneth Jaycox as senior vice president of business customer satisfaction to strengthen customer satisfaction and sales performance in the B2B segment. The company is also under scrutiny by U.S. lawmakers for possible tariff evasion related to Chinese company Qingdao Sunsong.

InvestingPro Insights

AutoZone (NYSE: AZO) is highlighted for its share repurchase strategy, which could be a positive signal for investors looking for management confidence in the company’s value. According to InvestingPro Tips, management is aggressively buying back shares. This is consistent with Morgan Stanley’s positive view of the company’s risk-reward profile.

InvestingPro data shows that AutoZone has a market capitalization of $51.91 billion and trades at a P/E ratio of 20.21, which is slightly above the industry average and reflects the premium to its market position and consistent performance. The company posted 5.03% revenue growth over the trailing twelve months to Q3 2024, demonstrating its ability to expand sales. Additionally, the company operates with a moderate level of debt, indicating a balanced approach to leverage and financial stability.

For investors considering investing in AutoZone stock, it’s important to note that the company doesn’t pay a dividend, which could impact investment decisions for those looking for regular income. However, with analysts forecasting profitability this year and a track record of high returns over the past decade, AutoZone presents itself as a compelling option for growth-oriented investors. Over 9 additional InvestingPro Tips for AutoZone are available, providing detailed insights into the company’s financial health and market performance.

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