AutoZone
AZO
$2957.95
-0.14%
AutoZone, Inc. is the largest US-based retailer of aftermarket automotive parts and accessories, operating over 7,600 stores and generating roughly $18.9 billion in fiscal 2025 sales, with a growing presence in Mexico and Brazil. The company serves two core customer segments: do-it-yourself (DIY) enthusiasts, which account for about 69% of domestic sales, and commercial do-it-for-me (DIFM) customers, representing the remaining 31%. Currently, the stock is under pressure due to slowing same-store sales growth, concerns over international expansion, and competitive threats such as O'Reilly's potential acquisition of Napa distribution, which could reshape the competitive landscape. Investors are debating whether the recent pullback represents a value opportunity or reflects fundamental deterioration in the company's growth prospects.…
AZO
AutoZone
$2957.95
Related headlines
Investment Opinion: Should I buy AZO Today?
We rate AZO a Hold, as the stock is attractively valued on forward earnings (17.25x) but faces significant near-term headwinds. The consensus Strong Buy with a 30.6% upside suggests potential, but the stock's downtrend and competitive threats warrant caution. Key supports include 8.44% revenue growth, 52.15% gross margin, and $1.63B FCF, but these are offset by margin compression and a 24% price decline. The rating would upgrade to Buy if the stock stabilizes above $3,200 and revenue growth sustains above 8%, or downgrade to Sell if same-store sales turn negative. Overall, AZO is fairly valued relative to its growth prospects, but the market is pricing in a recovery that may not materialize.
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AZO 12-Month Price Forecast
The AI assessment is neutral, as the stock's valuation is not cheap enough to be a clear buy, but the analyst consensus and revenue growth suggest upside potential. The key factor is whether the market's pessimism is overdone or justified. If revenue growth continues to accelerate and margins stabilize, the stock could re-rate higher. Conversely, if competitive pressures intensify, the stock could test the 52-week low. The stance would upgrade to bullish if the stock breaks above $3,200 with strong volume, and downgrade to bearish if it falls below $2,900.
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 +33.6% versus the current price.
Average Target
$3950.52
0 analysts
Implied Upside
+33.6%
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' (mean rating of 1.48 on a 1-5 scale, where 1 is Strong Buy). The average price target is $3,950.52, implying an upside of 30.6% from the current price of $3,025. The distribution includes 10 recent ratings: 8 Buy/Overweight/Outperform, 2 Neutral, and 0 Sell, indicating a bullish tilt. The target range spans from a low of $3,200 to a high of $4,800, with the low target still 5.8% above the current price, suggesting even the most bearish analyst sees limited downside. The wide spread of $1,600 between low and high targets reflects high uncertainty about the company's growth prospects, particularly regarding international expansion and competitive dynamics. Recent ratings have been stable, with no downgrades in the last three months, and the consensus remains firmly bullish despite the stock's decline.
Bulls vs Bears: AZO Investment Factors
The bull case rests on a strong analyst consensus, robust gross margins, and accelerating revenue growth, while the bear case highlights margin compression, a rich valuation, and competitive disruption. Currently, the bearish evidence is more compelling given the stock's 24% decline and the market's skepticism about growth sustainability. The key tension is whether the recent revenue acceleration (8.44% YoY) can offset margin pressures and competitive threats, which would determine if the stock is a value trap or a buying opportunity.
Bullish
- Strong Buy consensus with 30.6% upside: 23 analysts rate AZO a Strong Buy (mean 1.48), with an average target of $3,950.52, implying 30.6% upside from $3,025. Even the lowest target of $3,200 is 5.8% above current price, suggesting limited downside per sell-side.
- Robust gross margin at 52.15%: Q3 FY2026 gross margin was 52.15%, up from 52.72% a year ago, reflecting strong pricing power and category management. This high margin supports profitability despite competitive pressures.
- Revenue growth accelerating to 8.44% YoY: Q3 FY2026 revenue grew 8.44% YoY to $4.84B, up from 6.4% in Q2 FY2026, indicating a rebound in demand. TTM revenue reached $19.98B, showing continued expansion.
- Low beta of 0.344 provides downside cushion: AZO's beta of 0.344 means it is significantly less volatile than the market, historically protecting investors during broad sell-offs. This low correlation supports a defensive portfolio role.
Bearish
- Stock down 24.2% in 1 year: AZO has fallen 24.23% over the past year, underperforming the S&P 500 by 44.6 percentage points. The persistent downtrend reflects company-specific concerns beyond market movements.
- Operating margin compressed to 19.08%: Operating margin fell from 19.40% a year ago to 19.08% in Q3 FY2026, indicating cost pressures. Net margin also declined to 13.25% from 13.63%, showing erosion in profitability.
- High trailing PE of 28.2x vs industry 22x: AZO trades at a 28% premium to the specialty retail average PE of 22x. This premium is hard to justify given decelerating growth and competitive threats, leaving room for multiple compression.
- Competitive threat from O'Reilly-Napa deal: Reports of O'Reilly acquiring Napa distribution could reshape the competitive landscape, intensifying rivalry in commercial parts. This news triggered a 6% drop in July 2026, reflecting investor concern.
AZO Technical Analysis
AutoZone's stock is in a pronounced downtrend, with a 1-year price change of -24.23% and a 6-month change of -21.59%. The current price of $3,025 sits at approximately 6.9% above the 52-week low of $2,902.20 and 31.1% below the 52-week high of $4,388.11, indicating the stock is trading near the lower end of its range, which often signals either a value opportunity or a falling knife. The stock's beta of 0.344 suggests it is significantly less volatile than the market, but the persistent decline relative to the S&P 500 (relative strength of -44.60% over 1 year) highlights company-specific weakness.
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
-28.3%
Cumulative gain past year
| Period | AZO Return | S&P 500 |
|---|---|---|
| 1m | -0.5% | +2.5% |
| 3m | -13.2% | +2.7% |
| 6m | -21.1% | +11.1% |
| 1y | -28.3% | +20.5% |
| ytd | -10.5% | +12.3% |
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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 trailing twelve-month revenue of approximately $19.98 billion. However, growth is decelerating from the prior year's pace, as seen in the sequential quarterly revenues: Q4 FY2025 was $6.24 billion, Q1 FY2026 was $4.63 billion, Q2 FY2026 was $4.27 billion, and Q3 FY2026 was $4.84 billion, reflecting seasonal patterns but also a slowdown in same-store sales growth. The company's gross margin remains robust at 52.15% in Q3 FY2026, but operating margin has compressed to 19.08% from 19.40% a year ago, and net margin is 13.25%, down from 13.63% in the prior year quarter, indicating modest margin pressure.
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 17.25x, implying the market expects significant earnings growth (approximately 63% increase) over the next year, which is optimistic given the current growth trajectory. Compared to the specialty retail industry average PE of 22x (based on available data), AutoZone trades at a 28% premium, which may be justified by its superior margins and market leadership, but the premium narrows when considering forward earnings. 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 near the higher end of that range, suggesting the market is pricing in robust future growth despite recent headwinds.
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 elevated due to AutoZone's heavy reliance on debt to fund buybacks, with a negative debt-to-equity ratio of -3.6 and negative equity. The company's interest expense of $110.5M in Q3 FY2026 is manageable but rising, and the current ratio of 0.88 indicates potential liquidity strain. Margin compression, with operating margin down to 19.08% from 19.40%, suggests cost pressures that could erode profitability if revenue growth stalls. Additionally, the high trailing PE of 28.2x leaves little room for error, as any earnings miss could trigger a de-rating.
FAQ
The key risks are: 1) Competitive disruption from O'Reilly's potential acquisition of Napa, which could intensify price competition and pressure margins. 2) Margin compression, as seen in the operating margin falling to 19.08% from 19.40% a year ago. 3) High leverage, with a negative debt-to-equity ratio of -3.6, which increases financial risk. 4) Macroeconomic sensitivity, as a slowdown in consumer spending could reduce demand for auto parts. The most severe risk is a combination of these factors leading to a de-rating of the stock's multiple, potentially pushing the price down to the 52-week low of $2,902, a 4% downside from current levels.
The 12-month forecast is mixed. The bull case, with a 25% probability, sees the stock reaching $3,950-$4,800, driven by strong revenue growth and successful navigation of competitive threats. The base case, with a 50% probability, expects the stock to trade between $3,200 and $3,950, reflecting a balanced risk-reward. The bear case, with a 25% probability, could see the stock fall to $2,902-$3,200 if same-store sales decline and competition intensifies. The most likely scenario is the base case, with the stock gradually recovering as the market digests the competitive news and the company delivers steady, albeit slower, growth.
AZO is trading at a trailing PE of 28.2x, which is a 28% premium to the specialty retail average of 22x. However, the forward PE of 17.25x implies the market expects significant earnings growth, which may be optimistic given the current growth trajectory. Historically, AZO's PE has ranged from 10.5x to 34.1x, so the current level is near the higher end. The stock is not cheap on trailing earnings, but the forward valuation is more reasonable. The market is pricing in a recovery in earnings growth, which may or may not materialize. Overall, AZO is fairly valued relative to its growth prospects, but not a bargain.
AZO is a good buy for long-term investors who believe in the company's ability to navigate competitive challenges and continue growing. The stock offers a 30.6% upside to the average analyst target of $3,950, and the forward PE of 17.25x is reasonable. However, the stock is in a downtrend, and the trailing PE of 28.2x suggests the market is pricing in high growth expectations. The biggest risk is that same-store sales growth decelerates further, leading to a de-rating. For investors with a 3-5 year horizon, the current price offers a favorable entry point, but for short-term traders, the stock may continue to be volatile.
AZO is more suitable for long-term investment due to its low beta of 0.344, which provides stability, and its strong cash generation. The stock is not a dividend play, as it pays no dividend, but it offers capital appreciation potential. The company's earnings visibility is moderate, given the competitive environment, but its market leadership and high margins provide a foundation for long-term growth. Short-term trading is risky due to the stock's volatility and the potential for further downside. A minimum holding period of 3-5 years is recommended to ride out the current uncertainty and benefit from the company's growth initiatives.