Oppenheimer Analyst Downgrades AutoZone And This Stock With 'Tide Turning For Auto Parts'

While O'Reilly Automotive Inc ORLY is preparing to report results later this month, AutoZone Inc AZO had various analysts revising their forecasts after its fourth-quarter print.

COVID-19 pandemic-related tailwinds for auto part retail could continue to fade, lowering prospects of sales and EPS upside, according to Oppenheimer.

Auto Part Retail Rating Changes: Analyst Brian Nagel downgraded the ratings for O'Reilly Automotive and AutoZone from Outperform to Perform, while lowering the price targets from $1,000 to $930 and from $2,850 to $2,600, respectively.

Check out other analyst stock ratings.

Auto Part Retail Thesis: While both O'Reilly Automotive and AutoZone enjoyed competitive advantages amid supply chain disruptions, smaller companies have successfully re-stocked since then and “are no longer ceding market share as readily,” Nagel said in the downgrade note.

“Ongoing and potentially intensifying labor strikes will impact auto production at leading manufacturers, at least nearer term,” the analyst wrote.

“That said, with pandemic-related auto production bottlenecks now moderating, we are increasingly of the view that supply and affordability of vehicles should gradually normalize, encouraging consumers to more aggressively trade into newer cars, thereby undermining somewhat outsized demand for aftermarket auto parts,” he added.

ORLY, AZO Price Action: Shares of O'Reilly Automotive and AutoZone were up by 1.10% to $903.59 and by 0.18% to $2,526.30, respectively, at the time of publication Friday.

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