AutoZone (AZO) is likely to prove a "show me story" as management works to refine its narrative and re-establish credibility with core investors, Oppenheimer said in a report Friday.
Recent increases in investment spending are "strategic and disciplined," aimed at strengthening market share -- particularly in AutoZone's commercial business, which now accounts for more than 30% of revenue. The higher costs are viewed as largely temporary, with shares poised to "rebound meaningfully" as expense pressures ease and market share gains become clearer, the report said.
Reflecting the stepped-up investments, the investment bank cut the fiscal 2026 earnings forecast to $153.19 a share from $157.46, versus the Wall Street estimate of $150.91, based on an 18% operating margin. A preliminary fiscal 2028 earnings estimate of $215.74 a share was introduced, assuming margins recover to about 19.4%, near recent peak levels, Oppenheimer said.
Underlying health in auto parts retail remain "very solid," supported by an aging US vehicle fleet, diminished electric-vehicle disintermediation risks, continued product innovation and a prolonged maintenance deferral cycle, the report said.
Oppenheimer reiterated an outperform rating on AutoZone and adjusted its price target to $4,150 from $4,600.
Shares of the company were up 1.8% in recent Friday trading.
Price: 3374.58, Change: +60.59, Percent Change: +1.83
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