© Reuters. AutoZone (AZO) appears mispriced relative to commercial opportunity, claims UBS
UBS upgraded shares of AutoZone (NYSE:) to Buy from Neutral, raising the price target to $2,900 from $2,800 in a note Friday.
Analysts told investors in a note that AZO currently appears mispriced relative to its commercial opportunity. “We upgrade AZO from Neutral to Buy as we think the current valuation has created an attractive buying opportunity,” wrote the analysts.
“The multiple has compressed in response to the perception that AZO’s commercial prospects have dimmed and the fear that the sector will see more price competition,” they added.
They stated that as AZO shows evidence it can successfully navigate through these risks, its shares could rally.
“Over time, we believe AZO’s DIFM growth will re-accelerate while its DIY growth will be steady amid the uncertain macro backdrop. Ultimately, this should influence a return to a premium valuation multiple of 19x. Thus, we see ~30% potential upside to the current price & favorable 2.7:1 upside/ downside skew,” they concluded.
This story originally appeared on Investing
