AutoZone
AZO
$3067.99
-1.90%
AutoZone, Inc. is the largest U.S.-based retailer of aftermarket automotive parts and accessories, operating over 7,600 stores and generating roughly $18.9 billion in fiscal 2025 sales. The company serves both do-it-yourself (DIY) customers, who account for about 69% of domestic sales, and commercial do-it-for-me (DIFM) customers, representing the remaining 31%, with a growing presence in Mexico and Brazil. Currently, the stock is under pressure due to disappointing earnings, slowing same-store sales growth, and concerns about international expansion, compounded by a competitive threat from a potential O'Reilly acquisition of NAPA's distribution business. Investors are debating whether the recent decline represents a value opportunity or reflects fundamental deterioration in the face of intensifying competition.…
AZO
AutoZone
$3067.99
Related headlines
Investment Opinion: Should I buy AZO Today?
Rating: Hold. The consensus is Strong Buy with a 28.7% upside to the average target, but the recent downtrend and competitive risks warrant caution. The thesis is that AutoZone's strong revenue growth and forward valuation discount are offset by margin pressure and leverage.
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AZO 12-Month Price Forecast
The AI assessment is neutral with medium confidence. While revenue growth and forward valuation are supportive, the stock's technical downtrend and competitive risks create uncertainty. The base case is most likely, with the stock trading near the analyst average target. An upgrade to bullish would require evidence of margin stabilization and same-store sales acceleration, while a downgrade to bearish would follow competitive disruption or a significant earnings miss.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on AutoZone's 12-month outlook, with a consensus price target around $3950.52 and implied upside of +28.8% versus the current price.
Average Target
$3950.52
0 analysts
Implied Upside
+28.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$3200 - $4800
Analyst target range
AutoZone has coverage from 23 analysts, with a consensus recommendation of 'Strong Buy' and a mean rating of 1.48 (where 1 is Strong Buy and 5 is Sell). The average price target is $3,950.52, implying an upside of 28.7% from the current price of $3,069.62. The distribution of ratings is bullish, with 10 recent ratings including 7 Buy/Overweight and 3 Neutral, and no Sell ratings. The target price range is $3,200 to $4,800, with the low target representing a 4.2% upside and the high target representing a 56.4% upside. The wide spread of $1,600 between the low and high targets indicates significant uncertainty about the company's future, likely due to competitive pressures and macroeconomic factors. Recent ratings have been mostly reaffirmations of Buy or Overweight, with no downgrades, suggesting that analysts remain confident in the company's long-term prospects despite the recent stock decline.
Bulls vs Bears: AZO Investment Factors
AutoZone presents a mixed picture: strong revenue growth and a forward valuation discount are offset by margin pressure, high leverage, and competitive threats. The bear case currently has stronger evidence given the stock's 24.6% decline and negative relative strength, but the bull case is supported by analyst conviction and a forward PE below peers. The key tension is whether the recent slowdown is temporary or signals a structural shift in the aftermarket parts industry. If same-store sales stabilize and margins recover, the stock could re-rate higher; if competition intensifies, further downside is possible.
Bullish
- Revenue growth accelerating: Q3 FY2026 revenue grew 8.44% YoY to $4.84B, accelerating from 8.1% in the prior quarter. This shows continued demand for aftermarket parts despite macro headwinds.
- Forward PE at 22% discount: Forward PE of 17.5x is 22% below the specialty retail industry average of 22.5x, suggesting the market is pricing in significant earnings growth. This implies a reasonable valuation relative to peers.
- Strong analyst conviction: 23 analysts rate AZO a Strong Buy with a mean rating of 1.48 and an average target of $3,950.52, implying 28.7% upside. No sell ratings and recent ratings are all Buy/Overweight or Neutral.
- High gross margin resilience: Gross margin held at 52.15% in Q3, down only slightly from 52.72% a year ago. This demonstrates pricing power and stable input costs, supporting profitability.
Bearish
- Stock down 24.6% in 1 year: AZO has fallen 24.63% over the past year, underperforming the S&P 500's +21.46% gain. The stock sits just 6.9% above its 52-week low, reflecting persistent selling pressure.
- Margin contraction in Q3: Net margin fell to 13.25% from 13.63% YoY, and operating margin declined to 19.08% from 19.40%. Rising SG&A expenses are squeezing profitability.
- High leverage and negative equity: Debt-to-equity is -3.60 due to negative shareholders' equity, and current ratio is 0.88, indicating potential liquidity risk. The company's aggressive buybacks have eroded equity.
- Competitive threat from O'Reilly: Reports that O'Reilly may acquire NAPA's distribution business could intensify competition, pressuring AutoZone's market share and pricing. This news caused a 6% stock drop in July.
AZO Technical Analysis
AutoZone's stock is in a clear downtrend, with a 1-year price change of -24.63% and a 6-month change of -16.62%. The current price of $3,069.62 sits at only 6.9% above its 52-week low of $2,902.20 and 30.1% below its 52-week high of $4,388.11, indicating that the stock is trading near the bottom of its range. This positioning suggests a bearish sentiment, with the stock having lost significant ground over the past year, underperforming the S&P 500, which gained 21.46% over the same period.
Beta
0.34
0.34x market volatility
Max Drawdown
-32.9%
Largest decline past year
52-Week Range
$2902-$4388
Price range past year
Annual Return
-24.0%
Cumulative gain past year
| Period | AZO Return | S&P 500 |
|---|---|---|
| 1m | -0.2% | +2.4% |
| 3m | -10.0% | +4.7% |
| 6m | -17.9% | +11.7% |
| 1y | -24.0% | +21.3% |
| ytd | -7.1% | +13.4% |
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AZO Fundamental Analysis
AutoZone's revenue growth has been solid, with the most recent quarter (Q3 FY2026) showing revenue of $4.84 billion, up 8.44% year-over-year, and a sequential acceleration from the prior quarter's 8.1% growth. However, net income for the quarter was $641.5 million, a 5.4% increase from the prior year, but the net margin contracted slightly to 13.25% from 13.63% in the year-ago quarter. The company's gross margin remains strong at 52.15%, but operating margin declined to 19.08% from 19.40% a year ago, reflecting increased SG&A expenses. AutoZone's balance sheet is highly leveraged, with a debt-to-equity ratio of -3.60 (due to negative shareholders' equity) and a current ratio of 0.88, indicating potential liquidity risk. Free cash flow for the quarter was $456.5 million, down from $423.1 million in the prior year, and the company continues to repurchase shares aggressively, spending $580.7 million on buybacks in Q3. The negative ROE of -73.17% is a result of the company's negative equity position, which is common for companies that have leveraged buybacks.
Quarterly Revenue
$4.8B
2026-05
Revenue YoY Growth
+8.4%
YoY Comparison
Gross Margin
52.1%
Latest Quarter
Free Cash Flow
$1.6B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is AZO Overvalued?
Given AutoZone's positive net income, the PE ratio is the primary valuation metric. The trailing PE is 28.22x, while the forward PE is 17.51x, implying that the market expects significant earnings growth. This gap suggests that the market is pricing in a recovery in earnings, which is supported by analyst estimates of EPS of $268.49 for the current fiscal year. Compared to the specialty retail industry average PE of 22.5x, AutoZone's trailing PE of 28.22x represents a 25.4% premium, but its forward PE of 17.51x is at a 22.2% discount, indicating that the market expects above-average growth. Historically, AutoZone's PE has ranged from 10.5x to 34.1x over the past five years, and the current trailing PE of 28.22x is above the midpoint of that range, suggesting that the stock is not cheap on a trailing basis but is reasonably valued on a forward basis.
PE
28.2x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 11x~31x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
19.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial risks are significant: AutoZone's debt-to-equity of -3.60 reflects negative equity from years of leveraged buybacks, and the current ratio of 0.88 indicates potential liquidity strain. Interest expense of $110.5M in Q3 consumes a notable portion of operating income, and net margin contracted to 13.25% from 13.63% YoY. Free cash flow of $456.5M is positive but volatile, and the company's reliance on continued buybacks to boost EPS could be challenged if cash flow weakens.
FAQ
The key risks are: 1) Financial risk from high leverage (debt-to-equity of -3.60) and negative equity, which could limit financial flexibility. 2) Competitive risk from a potential O'Reilly acquisition of NAPA, which could intensify competition and pressure margins. 3) Macro risk from rising interest rates, which could increase debt costs and reduce consumer spending. 4) Company-specific risk of slowing same-store sales, which could lead to earnings misses. The most severe risk is a combination of these factors leading to a decline to the 52-week low of $2,902.
The 12-month forecast is mixed: the bull case (25% probability) targets $3,950-$4,800, the base case (50% probability) targets $3,200-$3,950, and the bear case (25% probability) targets $2,900-$3,200. The base case is most likely, assuming revenue growth continues at 6-8% and margins stabilize. The stock is currently at $3,069.62, near the lower end of the range, suggesting limited downside but also limited upside unless fundamentals improve. Analysts are bullish with a Strong Buy consensus and an average target of $3,950.
AutoZone's trailing PE of 28.2x is 25% above the specialty retail average of 22.5x, suggesting it is overvalued on trailing earnings. However, the forward PE of 17.5x is 22% below the industry average, indicating the market expects strong earnings growth. Historically, the PE has ranged from 10.5x to 34.1x, and the current trailing PE is above the midpoint. The market is pricing in a recovery in earnings, as evidenced by the forward PE discount. Overall, the stock is fairly valued on forward earnings but not cheap on trailing earnings.
AutoZone offers a compelling risk/reward with a 28.7% upside to the average analyst target, but the stock is in a downtrend and faces competitive threats. The forward PE of 17.5x is below the industry average, suggesting value, but the trailing PE of 28.2x indicates the market expects significant growth. For long-term investors with a 3-5 year horizon, it could be a good buy if same-store sales stabilize, but for short-term traders, the momentum is negative. The biggest downside risk is a decline to the 52-week low of $2,902, which is only 5.5% away.
AutoZone is better suited for long-term investment due to its low beta of 0.34, which indicates lower volatility, and its strong market position. The stock has a 1-year decline of 24.6%, but the forward PE suggests earnings growth potential. For short-term traders, the stock is in a downtrend and could continue to fall, making it risky. A minimum holding period of 3-5 years is recommended to allow the company to navigate competitive pressures and benefit from international expansion. The lack of a dividend makes it less attractive for income investors, but buybacks provide shareholder returns.