AZO: Ongoing Share Gains Will Drive Strength As Margin Headwinds Ease

AutoZone’s analyst price target has edged lower by $4 to $4,579, as analysts point to persistent, though largely temporary, margin pressures following mixed quarterly results. This comes despite ongoing share gains and long-term growth initiatives.

Analyst Commentary

Following AutoZone’s latest quarterly results, Wall Street analysts have provided a range of perspectives on the company’s outlook, marking both ongoing strengths and points of caution. Many research updates reflect adjustments to price targets along with underlying rationale tied to operating trends and growth initiatives.

Bullish Takeaways

Bullish analysts highlight AutoZone’s resilient sales momentum, supported by ongoing share gains in both DIY and do-it-for-me channels and continued market share expansion. This is noted even as the company faces short-term margin pressures.
Several price target increases were attributed to expectations for an acceleration in store expansion and successful same-store sales initiatives. These are viewed as growth drivers into the next fiscal year.
Even amid macro and margin headwinds, long-term EPS growth is expected to be robust. This is aided by disciplined capital allocation and sustained demand within the automotive aftermarket.
There is confidence that margin pressures tied to LIFO charges and SG&A investments are temporary. Management’s strategy is seen as supporting a return to stronger profitability as those factors normalize.

Bearish Takeaways

Bearish analysts warn that margin headwinds may persist in the near term, especially as higher SG&A expenses and LIFO-related charges weigh on profitability.
Mixed quarterly results, including earnings coming in below expectations, raised concerns about the durability of recent sales trends and execution around cost management.
Some caution remains regarding potential volatility in do-it-yourself demand, as macroeconomic factors and changing consumer spending could moderate topline growth.
There is also apprehension over the sustainability of aggressive store growth, which brings upfront cost pressure that could impact earnings leverage if sales growth does not keep pace.

What's in the News

On October 9, 2025, AutoZone increased its equity buyback plan by an additional $1,500 million, bringing the total authorization to $33,750 million (Key Developments).
Between May 11, 2025, and August 30, 2025, AutoZone repurchased 116,928 shares for $446.74 million, resulting in the completion of 44,805,959 shares repurchased with a total value of $31,617.7 million under the ongoing buyback plan (Key Developments).

Valuation Changes

Fair Value Estimate has decreased slightly from $4,583 to $4,579, reflecting a marginal adjustment in overall valuation assumptions.
Discount Rate has risen slightly from 8.69% to 8.75%, suggesting a modest increase in projected risk or cost of capital.
Revenue Growth projections have edged lower from 7.83% to 7.82%, indicating a negligible reduction in sales growth expectations.
Net Profit Margin has declined minimally from 13.49% to 13.48%, signaling a marginal narrowing of anticipated profitability levels.
Future P/E multiple has increased very slightly from 29.41x to 29.46x, reflecting a minor change in forward earnings valuation.

Expansion of Mega-Hub locations and international stores is expected to drive revenue growth and improve sales margins by enhancing inventory availability.
Investments in advanced technology for distribution centers aim to improve supply chain efficiencies and net margins, while share buybacks enhance earnings per share.
The company faces margin pressures from foreign exchange headwinds, inflation, tariffs, and rising expenses, impacting revenue and earnings unless offset by strong sales growth.

Catalysts

About AutoZone

AutoZone, Inc. retails and distributes automotive replacement parts and accessories in the United States, Mexico, and Brazil.What are the underlying business or industry changes driving this perspective?

AutoZone's focus on improving availability and speed of delivery in the Domestic Commercial business is expected to drive further sales growth, contributing significantly to revenue growth.
The expansion of Mega-Hub locations, with an aim to open at least 19 more in the next two quarters, will enhance inventory availability and support both retail and Commercial growth, potentially improving sales and operating margins.
International expansion, particularly in Mexico and Brazil, with a target of opening 100 new international stores in the fiscal year, is poised to increase revenue and profitability by tapping into underpenetrated markets.
Investments in new distribution centers featuring advanced technology and automation in California and Virginia are expected to create supply chain efficiencies, which should help to improve net margins.
AutoZone's consistent share buyback program, supported by strong free cash flow generation, is set to continue enhancing earnings per share (EPS) over time.

AutoZone Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming AutoZone's revenue will grow by 6.0% annually over the next 3 years.
Analysts are assuming AutoZone's profit margins will remain the same at 13.6% over the next 3 years.
Analysts expect earnings to reach $3.1 billion (and earnings per share of $198.33) by about September 2028, up from $2.6 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.1x on those 2028 earnings, up from 28.0x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.7x.
Analysts expect the number of shares outstanding to decline by 1.04% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.57%, as per the Simply Wall St company report.

AutoZone Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The impact of foreign exchange rates resulted in significant headwinds, reducing sales by $91 million and EBIT by $30 million, which could continue to negatively impact reported revenue and earnings.
The variations in performance across different regions, particularly the Northeast and Rust Belt, due to severe weather conditions, show volatility in sales, which might affect consistent revenue streams.
Persistent inflationary pressures expected to increase ticket prices by approximately 3% and result in lower transaction counts, indicating consumer caution about spending, potentially impacting overall revenue.
20% tariffs on SKUs from China could pose additional cost pressures; historically, maintaining margin post-tariffs has been challenging, leading to potential impacts on net margins if not offset efficiently.
Continued investment in aggressive expansion and technology are leading to higher SG&A expenses, causing margin pressures and limiting earnings growth unless sales growth compensates for these costs.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $4202.409 for AutoZone based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4900.0, and the most bearish reporting a price target of just $2900.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $22.5 billion, earnings will come to $3.1 billion, and it would be trading on a PE ratio of 28.1x, assuming you use a discount rate of 8.6%.
Given the current share price of $4291.12, the analyst price target of $4202.41 is 2.1% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

AZO: Accelerated Store Expansion Will Drive Continued Market Share Gains