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Morgan Stanley upgraded AutoZone (NYSE:AZO) to an Obese ranking after having the retailer slotted at Equal-weight.
The agency thinks that AZO gives ~20% upside with a horny ~3:1 bull/bear skew.
Analyst Simeon Gutman and crew have extra conviction within the sturdiness of AZO’s gross sales/earnings development than for different do-it-yourself auto friends.
“AZO is a self-help story (its industrial playbook is working), the enterprise has a historical past of prudent expense administration, and DIY Auto is a defensive class. These elements improve AZO’s earnings visibility amid an unsure macro backdrop. As well as, we’re assured in AZO’s pricing energy and suppose there’s extra DIFM upside from the mega hub technique.”
In regard to valuation, the mid- to high-teens P/E is known as justified given AZO’s monitor file of execution, growing publicity to the higher-growth DIFM phase, and historic premium to the market throughout financial slowdowns. AZO is famous to be buying and selling at ~16.5X near-term P/E, which is in-line with the three-year historic common a number of and barely beneath its historic relative market a number of throughout recession durations.
Morgan Stanley’s value goal of $2,240 on AZO relies on a ~18.5x P/E a number of off the 2023 EPS estimate.
Shares of AZO rose 0.21% premarket to $2,018.00. vs. the 52-week buying and selling vary of $1,374.13 to $2,267.40.
