AutoZone
AZO
$2910.54
+2.26%
AutoZone, Inc. is the largest US-based retailer of aftermarket automotive parts and accessories, operating over 7,600 stores across the United States, Mexico, and Brazil, serving both do-it-yourself (roughly two-thirds of domestic sales) and commercial do-it-for-me customers through its growing DIFM program. The company is a dominant specialty retailer in the Consumer Cyclical sector, distinguished by its scale, dense store network, and a capital-return model built on aggressive share buybacks rather than dividends. The current investor narrative is dominated by a sharp deceleration in same-store sales growth, a revenue miss in the fiscal Q4 2026 report (EPS beat but top line disappointed), and competitive anxiety following reports that O'Reilly Automotive may acquire Genuine Parts' NAPA distribution business, which could reshape the aftermarket landscape. These pressures have driven a pronounced de-rating in the stock, with shares down over 34% year-over-year, even as management continues to expand internationally and lean on its commercial segment for growth.…
AZO
AutoZone
$2910.54
Related headlines
Investment Opinion: Should I buy AZO Today?
The synthesized recommendation is a Hold with a value bias, reflecting a deeply discounted valuation offset by deteriorating momentum and unresolved competitive threats. The analyst consensus is 'Strong Buy' with an average target of $3,708.71 (32.8% upside), but the stock's severe underperformance and recent revenue miss suggest the market is pricing in a more cautious outlook than analysts currently acknowledge. The core thesis is that AZO's non-discretionary business model and aggressive buybacks provide a floor, but a re-rating requires evidence of stabilizing same-store sales.
Supporting evidence for a Hold includes: (1) forward PE of 14.51x versus trailing 18.97x, implying expected EPS growth to $256.80; (2) Q4 2026 gross margin expansion to 53.34% and operating margin of 19.97%, demonstrating pricing power; (3) free cash flow of $1.122 billion TTM, funding $580.7 million in Q3 buybacks; and (4) 32.8% upside to consensus targets. However, the PEG ratio of 3.86 and revenue growth of just 5.64% YoY highlight the growth challenge. The stock's 34.36% one-year decline and 1.8% premium to its 52-week low reflect deep pessimism that may be overdone, but without a catalyst, the downtrend could persist.
The biggest risks that could invalidate the thesis are: (1) a successful O'Reilly-NAPA combination that erodes AZO's commercial market share; (2) continued same-store sales deceleration leading to earnings misses and downgrades; and (3) the leveraged balance sheet limiting financial flexibility if cash flows weaken. The rating would upgrade to Buy if same-store sales stabilize above 3% and the stock holds above $2,756, or downgrade to Sell if revenue growth turns negative or the stock breaks below $2,700 on high volume. Relative to its own history, AZO is undervalued on a PS basis (2.40x vs. historical highs) but fairly valued on earnings given the growth slowdown; the stock appears to be pricing in a mild recession scenario.
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AZO 12-Month Price Forecast
AZO presents a classic value trap versus deep value debate. The forward PE of 14.51x and 32.8% analyst upside suggest the market is overly pessimistic, but the 5.64% revenue growth and competitive threats justify caution. The low beta of 0.34 and non-discretionary demand provide downside protection, yet the leveraged balance sheet and negative equity amplify risk if comps deteriorate. I would upgrade to bullish if same-store sales stabilize above 3% and the stock holds above $2,756, or downgrade to bearish if revenue growth turns negative or the O'Reilly-NAPA deal proceeds without regulatory hurdles. The risk/reward is balanced, favoring a neutral stance until clearer catalysts emerge.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on AutoZone's 12-month outlook, with a consensus price target around $3719.96 and implied upside of +27.8% versus the current price.
Average Target
$3719.96
0 analysts
Implied Upside
+27.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$3000 - $4800
Analyst target range
There are 24 analysts covering AutoZone, with a consensus recommendation of 'Strong Buy' (recommendation mean of 1.46). The average target price is $3,708.71, which implies an upside of 32.8% from the current price of $2,792.03. The consensus is bullish, with the majority of analysts maintaining Buy or Strong Buy ratings, as seen in recent institutional ratings from JP Morgan (Overweight), Guggenheim (Buy), Raymond James (Strong Buy), and others. However, the stock's severe underperformance and the recent revenue miss suggest that analysts may be slow to revise their targets downward, creating a potential disconnect between consensus and market reality.
The target price range is wide, from a low of $3,000 to a high of $4,800, a spread of 60% of the low target. The high target of $4,800 assumes a successful turnaround in same-store sales, margin expansion, and multiple re-rating, while the low target of $3,000 (still 7.4% above the current price) implies a modest recovery but acknowledges the growth challenges. The wide spread signals high uncertainty and divergent views on the company's ability to navigate competitive pressures and macro headwinds. Notably, the low target is above the current price, which may indicate that analysts believe the selloff is overdone, but the stock's price action suggests the market disagrees. If the company misses upcoming earnings or loses market share, downgrades could follow, pressuring the stock further.
Bulls vs Bears: AZO Investment Factors
The bear case currently has stronger near-term evidence: the stock is in a confirmed downtrend, revenue growth is decelerating, and competitive threats are real. However, the bull case rests on compelling valuation and analyst conviction, with a forward PE of 14.51x and 32.8% upside to consensus targets. The single most important tension is whether AZO can stabilize same-store sales and return to mid-single-digit comps; if it does, the stock could re-rate sharply, but if comps continue to weaken, further multiple compression is likely. The low beta and non-discretionary nature of the business provide some downside protection, but the leveraged balance sheet leaves little room for error. Ultimately, this is a classic value-versus-momentum debate where the resolution hinges on the next few quarters of comps and competitive developments.
Bullish
- Deep Value on Forward Earnings: AZO trades at a forward PE of 14.51x versus a trailing PE of 18.97x, implying the market expects roughly 30% EPS growth to $256.80 next year. This is a steep discount to the S&P 500's forward multiple and near the low end of AZO's historical 12x–34x range, suggesting the de-rating has overshot fundamentals.
- Analyst Consensus Strong Buy: 24 analysts rate AZO a consensus 'Strong Buy' with a mean recommendation of 1.46 and an average target price of $3,708.71, implying 32.8% upside from $2,792.03. Even the lowest target of $3,000 is 7.4% above the current price, indicating analysts see the selloff as overdone.
- Robust Margins and Cash Flow: Q4 2026 gross margin expanded to 53.34% from 52.15% in Q3, and operating margin rose to 19.97% from 19.08%. Free cash flow remains positive at $1.122 billion TTM, comfortably funding $345.5 million in capex and $580.7 million in buybacks.
- Low Beta, Defensive Characteristics: AZO's beta of 0.34 means it historically moves only about one-third as much as the market, making it a defensive holding in volatile periods. The aftermarket parts business is non-discretionary, as consumers repair rather than replace vehicles during economic downturns.
Bearish
- Severe Price Downtrend: AZO is down 34.36% over the past year and 15.49% YTD, massively underperforming the S&P 500's +15.01% 1-year return. The stock sits just 1.8% above its 52-week low of $2,756.13 and 34.3% below its 52-week high of $4,252.54, placing it in the bottom 2% of its 52-week range.
- Revenue Growth Deceleration: Fiscal Q4 2026 revenue grew only 5.64% YoY to $6.595 billion, missing expectations and slowing from prior periods. The core DIY business is mature, and growth is increasingly reliant on lower-margin commercial and international segments that carry execution risk.
- Competitive Threat from O'Reilly/NAPA: Reports that O'Reilly Automotive may acquire Genuine Parts' NAPA distribution business sent AZO down over 6% on July 6, 2026. A combined O'Reilly-NAPA would create a formidable competitor with expanded distribution and purchasing scale, potentially pressuring AZO's commercial market share.
- Stretched Balance Sheet: AZO carries negative shareholders' equity with a debt-to-equity of -4.97 and a current ratio of 0.90, indicating limited short-term liquidity buffer. Interest expense of $148.6 million in Q4 2026 consumes a meaningful portion of operating income, and the leveraged buyback model amplifies risk if cash flows deteriorate.
AZO Technical Analysis
AutoZone is in a sustained downtrend, with the stock down 34.36% over the past year and 15.49% year-to-date, a stark underperformance versus the S&P 500's +15.01% 1-year return. At the current price of $2,792.03, the stock sits at just 1.8% above its 52-week low of $2,756.13 and roughly 34.3% below its 52-week high of $4,252.54, placing it in the bottom 2% of its 52-week range. This positioning signals a stock in a clear bearish trend, where the risk of a breakdown to new lows is elevated and any bounce is likely to face heavy overhead supply. The relative strength versus SPY is deeply negative across all timeframes (-49.37% over 1 year, -28.35% YTD), confirming that capital is rotating out of AZO and into the broader market.
Short-term momentum remains weak but shows tentative signs of stabilization: the 1-month change is -4.86%, the 3-month change is -11.62%, and the 6-month change is -17.89%, indicating that the pace of decline is decelerating (the 1-month drop is smaller than the 3-month and 6-month drops). This deceleration could signal a potential bottoming process, but it is not yet confirmed by a reversal in trend. The stock's beta of 0.34 is remarkably low, meaning AZO has historically been far less volatile than the market; however, in this case, the low beta has not protected it from a severe idiosyncratic selloff driven by company-specific concerns. Volume of 169,803 on the latest day is modest, suggesting the selling may be losing intensity, but without a high-volume reversal day, the downtrend remains intact.
Key technical support is the 52-week low at $2,756.13, just 1.3% below the current price; a decisive breakdown below this level would likely trigger further selling and open the door to new multi-year lows. Resistance is the 52-week high at $4,252.54, but more immediate resistance lies around the $3,000 psychological level and the $3,200 area where the stock consolidated in July 2026. Given the beta of 0.34, the stock's daily swings are typically about one-third of the market's, which means position sizing can be larger for the same dollar risk, but the current downtrend and proximity to support warrant caution. A breakout above $3,200 would be the first sign of a trend change, while a breakdown below $2,756 would confirm the bearish thesis.
Beta
0.40
0.40x market volatility
Max Drawdown
-35.9%
Largest decline past year
52-Week Range
$2731-$4146
Price range past year
Annual Return
-27.7%
Cumulative gain past year
| Period | AZO Return | S&P 500 |
|---|---|---|
| 1m | -1.4% | +1.0% |
| 3m | -5.3% | +2.5% |
| 6m | -15.2% | +13.9% |
| 1y | -27.7% | +15.0% |
| ytd | -11.9% | +13.5% |
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AZO Fundamental Analysis
AutoZone's revenue trajectory is decelerating: fiscal Q4 2026 revenue was $6.595 billion, up 5.64% year-over-year, but this compares to Q4 2025 revenue of $6.243 billion and Q3 2026 revenue of $4.841 billion. The YoY growth of 5.64% is a slowdown from prior periods, and the company missed revenue expectations in the most recent quarter, which management attributed to softer same-store sales and macro headwinds. The revenue segment data shows only 'Auto Parts Locations' at $4.841 billion for Q3 2026, but the core domestic DIY business is mature, and growth is increasingly reliant on the commercial (DIFM) segment and international expansion, which are lower-margin and face execution risk. The deceleration in growth is the primary driver of the stock's de-rating, as the market questions whether AutoZone can sustain its historical mid-single-digit comps.
Profitability remains robust: Q4 2026 net income was $931.6 million on revenue of $6.595 billion, a net margin of 14.13%, while gross margin was 53.34% and operating margin was 19.97%. These margins are strong for a specialty retailer and have been relatively stable, with gross margin improving from 52.15% in Q3 2026 to 53.34% in Q4 2026, and operating margin rising from 19.08% to 19.97% over the same period. The company's ROA of 11.35% is healthy, but ROE is negative (-102.81%) due to negative shareholders' equity from years of aggressive buybacks, a capital structure quirk that makes traditional ROE less meaningful. The margin expansion in Q4 is a positive sign, but the revenue miss suggests that top-line pressure could eventually weigh on margins if the company resorts to discounting to drive traffic.
AutoZone's balance sheet is highly leveraged with negative equity: debt-to-equity is -4.97, current ratio is 0.90, and the company carries significant debt (interest expense of $148.6 million in Q4 2026). However, free cash flow remains positive at $1.122 billion TTM, and operating cash flow was $802.0 million in Q3 2026, which comfortably covers capital expenditures of $345.5 million and share repurchases of $580.7 million. The company returned substantial capital to shareholders via buybacks ($427.2 million in Q1 2026, $314.5 million in Q2 2026, $580.7 million in Q3 2026), funded by debt and cash flow. The negative equity and high leverage are intentional, but they amplify financial risk if cash flows deteriorate; the current ratio below 1.0 indicates limited short-term liquidity buffer, though this is typical for AZO's model.
Quarterly Revenue
$6.6B
2026-08
Revenue YoY Growth
+5.6%
YoY Comparison
Gross Margin
53.3%
Latest Quarter
Free Cash Flow
$1.1B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is AZO Overvalued?
Because AutoZone is profitable (Q4 2026 net income of $931.6 million), the PE ratio is the primary metric. The trailing PE is 18.97x, while the forward PE is 14.51x, implying the market expects earnings growth of about 30% over the next year (based on the gap). However, the forward PE is based on estimated EPS of $256.80, which seems inconsistent with the trailing EPS of $0.0527 from the key metrics (likely a data error) and the quarterly EPS of $56.99; using the quarterly EPS annualized (~$228), the forward PE is more reasonable. The large gap between trailing and forward PE suggests the market is pricing in a significant earnings recovery, but given the revenue miss and slowing growth, this optimism may be misplaced.
Compared to the industry, AutoZone's PS ratio of 2.40x and EV/Sales of 2.86x are moderate for a specialty retailer, but without a direct industry average in the data, we note that the S&P 500's average PS is around 2.5x. The company's net margin of 12.65% and gross margin of 52.34% are above typical retail averages, which could justify a premium. However, the PEG ratio of 3.86 is high, indicating that the stock is expensive relative to its growth rate, which is a concern given the decelerating top line. The EV/EBITDA of 16.37x is also elevated for a mature retailer, suggesting the market is still assigning a growth premium that may not be warranted.
Historically, AutoZone's PE ratio has ranged from about 12x to 34x over the past three years, with the current trailing PE of 18.97x near the middle of that range. However, the PS ratio of 2.40x is near the low end of its historical range (which has been as high as 15x in recent years, though that was likely due to data anomalies), and the price-to-book is negative, making it not meaningful. The current valuation appears to be at a discount to its own history on a PS basis, but the earnings multiple is not particularly cheap given the growth slowdown. If the company can stabilize comps and return to mid-single-digit growth, the stock could re-rate; otherwise, further multiple compression is likely.
PE
19.0x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 13x~31x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
16.4x
Enterprise Value Multiple
Investment Risk Disclosure
AutoZone's financial risk is dominated by its highly leveraged balance sheet and negative equity, a deliberate capital structure that amplifies returns in good times but magnifies vulnerability in downturns. Debt-to-equity stands at -4.97, the current ratio is 0.90, and interest expense of $148.6 million in Q4 2026 consumed 11.3% of operating income. While free cash flow of $1.122 billion TTM covers capex and buybacks, any deterioration in cash generation—say, from a deeper same-store sales decline—could force the company to slow buybacks or increase borrowings, undermining the EPS growth story. Additionally, the revenue mix is concentrated in the mature domestic DIY market (roughly two-thirds of domestic sales), leaving growth dependent on the lower-margin commercial segment and international expansion, both of which carry execution risk.
Market and competitive risks are intensifying. The potential O'Reilly-NAPA combination, reported in July 2026, could create a competitor with superior scale and distribution, pressuring AZO's commercial market share and pricing power. The stock's beta of 0.34 offers little protection against idiosyncratic shocks, as evidenced by the 34% one-year decline despite a rising broader market. Valuation compression risk is real: the trailing PE of 18.97x is mid-range historically, but the PEG ratio of 3.86 suggests the market may still be overpaying for growth that is decelerating. Macro sensitivity is moderate—aftermarket demand is non-discretionary—but a recession could still dampen discretionary DIY projects and commercial fleet maintenance.
In a worst-case scenario, a continued decline in same-store sales, market share losses to a combined O'Reilly-NAPA, and a broader consumer slowdown could drive the stock below its 52-week low of $2,756.13. If the company misses upcoming earnings and analysts downgrade, the stock could test the $2,500–$2,600 range, representing a 7–11% decline from current levels. A more severe scenario, where the competitive threat proves structural and margins compress, could see the stock fall to the analyst low target of $3,000—but that is above the current price, suggesting the market is already pricing in significant pessimism. The maximum drawdown over the past year was -35.88%, and a repeat of that magnitude from the current price would imply a drop to roughly $1,790, though that seems extreme given the valuation support. Realistically, investors could lose 10–15% from current levels in an adverse scenario, with the 52-week low at $2,756 serving as the first major support.
FAQ
The key risks for AZO are ranked as follows: (1) Competitive risk: the potential O'Reilly-NAPA combination could create a dominant competitor, pressuring AZO's commercial market share and pricing power, as reflected in the 6% drop on July 6, 2026. (2) Financial risk: negative equity (debt-to-equity of -4.97) and a current ratio of 0.90 leave little liquidity buffer, and interest expense of $148.6 million in Q4 2026 consumes 11.3% of operating income. (3) Growth risk: revenue growth has decelerated to 5.64% YoY, and same-store sales are under pressure, which could lead to earnings misses and further de-rating. (4) Macro risk: while aftermarket demand is non-discretionary, a severe recession could still dampen commercial and DIY spending, and the stock's low beta (0.34) has not protected it from idiosyncratic shocks. These risks are significant but partially mitigated by the company's strong margins and cash flow.
The 12-month forecast for AZO is based on three scenarios: bull case (25% probability) targets $3,700–$4,800, assuming same-store sales stabilize and competitive threats recede; base case (55% probability) targets $3,000–$3,700, assuming gradual recovery and stable margins; bear case (20% probability) targets $2,500–$3,000, assuming negative comps and a successful O'Reilly-NAPA merger. The most likely scenario is the base case, where the stock trades in a range as the market awaits clearer signs of a turnaround. The key assumption is that revenue growth stabilizes at 4–6% and gross margins hold above 52%. If the company misses on comps or the competitive landscape worsens, the bear case could play out, but the deep valuation discount provides some downside support.
AZO appears undervalued on a forward earnings basis but fairly valued to slightly expensive on growth-adjusted metrics. The forward PE of 14.51x is near the low end of its historical range (12x–34x) and below the S&P 500's average, suggesting the market is pricing in pessimism. However, the PEG ratio of 3.86 is high, indicating the stock is not cheap relative to its 5.64% revenue growth. The PS ratio of 2.40x is moderate for a specialty retailer, and the EV/EBITDA of 16.37x is elevated for a mature company. The market seems to expect a significant earnings recovery (implied by the gap between trailing and forward PE), but if growth fails to materialize, further multiple compression is likely. Relative to its own history, AZO is undervalued on PS but not on PE, making the valuation verdict mixed.
AZO is a good buy for value-oriented investors with a long-term horizon, but it carries significant near-term risk. The stock trades at a forward PE of 14.51x, well below the market average, and analysts see 32.8% upside to their average target of $3,708.71. However, the company missed revenue expectations in Q4 2026, with growth slowing to 5.64% YoY, and the stock is down 34.36% over the past year, sitting just 1.8% above its 52-week low. The biggest downside risk is a continued decline in same-store sales or a competitive shock from the potential O'Reilly-NAPA merger. For investors who believe the aftermarket demand is resilient and the selloff is overdone, AZO offers a compelling risk/reward, but it is not a low-risk entry given the downtrend. A staggered buying approach or waiting for a confirmed reversal above $3,000 would be prudent.
AZO is better suited for long-term investment (minimum 2–3 years) than short-term trading. The company is a mature, low-beta (0.34) stock with no dividend, so returns depend on capital appreciation and buybacks. The current downtrend and proximity to the 52-week low make short-term trading risky, as momentum is negative and a breakdown could occur. However, for long-term investors, the non-discretionary nature of the business, strong free cash flow ($1.122 billion TTM), and aggressive buybacks ($580.7 million in Q3 2026) provide a path to EPS growth even with modest revenue growth. The stock's 34% decline has created a valuation opportunity, but patience is required as the turnaround may take several quarters. A minimum holding period of 2–3 years allows time for same-store sales to recover and the market to re-rate the stock.