Trading.biz analyst Rahul Nambiampurath believes that AutoZone (AZO) has the legs to increase by even 20% in the short term.
“The automotive sector is expected to grow as global economies recover and consumer spending rebounds. AutoZone’s strategic initiatives align well with these trends, positioning it as a key player capable of capitalizing on market opportunities others may overlook,” mentions Rahul.
AutoZone has registered an impressive year-to-date performance of 6.64%, led by exceptional Q1 2024 results, strategic initiatives, and store expansions.
Tracking AutoZone’s fundamentals
AutoZone, a company specific to the Automotive Retail and Wholesale Parts space, has showcased significant fundamental strength over the past few months. Rahul has analyzed the Q1 2024 financial performance, released in May 2024, enlisting the possible bullish metrics. These include the following:
- Net Sales: $4.2 billion, a 3.5% increase year-over-year
- Same Store Sales: Increased by 0.9%
- EPS (Earnings Per Share): $36.69, beating analysts’ expectations of $35.67
- Store Expansion: Opened 16 new stores in the US, with international expansion in Mexico and Brazil continuing robustly
- Revenue Growth: Revenue up 4.6% year-over-year to $3.86 billion
The Q1 2024 financial report highlights the company’s resilient growth, driven by solid sales figures and strategic store expansions domestically and internationally.
Rahul further adds that the company’s ability to beat EPS expectations underscores its operational efficiency and market strength. He believes this performance has fueled bullish sentiment among analysts.
Rahul has also identified other key factors pushing AZO prices higher:
- Market position and expansion across markets like Brazil and Mexico.
- Sector-specific strength with consumers investing extensively in vehicle repairs and maintenance.
- Technological advancements like data-driven inventory management.
Technical analysis backing analyst claims
Bret Jordan, the analyst at Jefferies, is one of many to rate AZO a “Buy,” with a prospective target of $3400. Here is what Rahul has identified, looking at the daily chart of AZO:
AutoZone Price Chart: TradingView
Rahul believes that AZO might correct a bit, allowing new buyers to enter at close to $2671 and then $2367. One of the biggest reasons for this slightly tepid stance is the RSI showing bearish divergence.
However, if the price breaches past the upper trendline of the ascending channel pattern, you can expect more bullishness.
If the bullish trend continues, key levels for AZO could be $2943 and $3392, in line with Bret Jordan’s target of $3400.
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