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stock was edging lower on Monday after a downgrade by Argus, which argues that the auto parts retailer’s rally could run out of gas.
Shares of AutoZone (ticker: AZO) were off 0.2% to $1,386.80 in morning trading. The stock is up 17% year to date and has gained 21.3% in the past 12 months. Rival O’Reilly Automotive (ORLY) was up 1.7% since Barron’s recommended it in April.
Analyst John Eade lowered his rating to Hold from Buy after the shares surpassed his former target of $1,385, arguing that they look fully valued after the recent run.
Although AutoZone delivered much better-than-expected earnings last month—its peers did too—the shares have drifted lower since. Still, the stock has handily outperformed the broader market in recent months, with a double-digit gain. Eade wrote that the company has certainly bounced back from the effects of the Covid-19 pandemic, beating analysts’ earnings estimates for the past four quarters, yet he sees slower growth ahead as the economy recovers and new car sales rise.
The analyst also noted that technical trends, which had been positive for two years, have turned bearish, and the stock’s “valuations are reasonable against the peer group, but no longer outstanding.”
Nevertheless, Eade wrote that he would turn more constructive again if on shares fall another 5% to 10% and the company is able to keep putting up better-than-anticipated results.
BofA analyst Elizabeth Suzuki is being more cautious on AutoZone as well, also citing its run.
Write to Teresa Rivas at teresa.rivas@barrons.com
