AutoZone (NYSE: AZO) shares are in a long-term, sustained uptrend and are expected to cross the $4,400 level this year. The market for AZO shares is expected to surpass the $4,400 level due to its growing blue-chip business, strong cash flow, capital return, analysts’ activity, and stock price action leading up to the FQ3 earnings release.
The stock price action alone is enough to pique a trader's interest, displaying a bullish flag within a solid uptrend and a market with room to run higher. The low-ball estimate is a move equal to the 2025 rally, which is about $600; sufficient to put this market at $4,400. The bull-case scenario is that this company continues firing on all cylinders and drives its stock price higher for years, potentially doubling it from late May 2025 levels within the next decade.
AutoZone’s Capital Return Is Why You Want to Own It
Among the critical factors driving this market is the company’s cash flow and capital return. The cash flow is ample and sustains regular, quarterly repurchases that reduce the share count each time. The FQ3 buybacks topped $250 million, less than half the quarterly net income, aiding a 3% YOY reduction in the share count. The pace of buybacks is expected to remain strong in FQ1 and the foreseeable future because of the cash flow, balance sheet, and $1.1 billion remaining on the current authorization. Due to the history and cash flow, investors can expect the authorization to be renewed once the current allotment is exhausted.
The only negative in the outlook is AutoZone’s shareholder deficit. However, the deficit is entirely due to share repurchases, which effectively burn cash and convert it into nothing, nothing other than improved shareholder leverage, which aids the uptrend in share prices.
The other pertinent details are the flat cash compared to last year, the increased inventory related to store count growth and growth initiatives, and the low leverage. The company’s debt has increased compared to the previous year, but remains low at less than 0.5x equity. The takeaway is that AutoZone can continue to invest in its growth while sustaining its capital return and balance sheet health.
Analysts' Revisions Turbo-Charge AutoZone Stock Price Outlook
MarketBeat tracked a dozen analysts’ revisions within the first few hours of the Q3 release, including an increased price target. The range of new targets set a new high-end of $4,800, representing about a 33% upside from late May trading levels.
[content-module:Forecast|NYSE: AZO]The average revisions place this market at $4,130, a 10% gain when reached, marking a new all-time high and 5% above the then-current consensus. Investors can expect the positive trend in revisions to continue due to the growth and capital return outlook.
AutoZone’s Q3 results were mixed relative to consensus estimates, but they do not alter the outlook. The $4.62 billion in revenue represents a 5.2% year-over-year increase, driven by positive comparable store sales (comps) in both segments and an expansion in store count. Margin contraction is expected to be temporary. The margin contracted on shrink, mix, and start-up costs for a new distribution center that will help sustain improved merchandise margins over time.
AutoZone has another tailwind to drive its stock price: institutional investors. The institutional interest is significant, accounting for roughly 90% of the stock, and the group is buying on balance in 2025.
This is a solid support base, providing upward pressure on the action and unlikely to shift soon. The more likely scenario is that institutional activity remains bullish on balance this year and may even accelerate for this retail stock.
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