Winning With AutoZone

Dec. 07, 2018 1:44 PM ETAutoZone, Inc. (AZO)3 Comments

Summary

  • After a 40% plus rally from our call a few months ago, shares are pulling back with market volatility.
  • Fiscal 2019 is off to a strong start and we are closely watching comp sales as well as investments into mobile going forward.
  • Key indicators remain strong and the name is growing earnings at an amazing rate, fueled in part by an ongoing repurchase program.
  • A quality company at a fair price.
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AutoZone (NYSE:AZO) is a name that is a reliable trade, though as an investment it tends to peak and then pull back. Over at BAD BEAT Investing, we put out a buy alert a few months ago on this stock and said plainly there was a major opportunity in the name under $600. The stock has now rallied well over 40%. However, the name is once again pulling back, and this compels us to revisit the name. With the company having just reported earnings, which suggests the future is bright, we think a potential entry point to get back into the name could be approaching during this volatile time in the stock market. Our sentiment is bullish, but let the name pull back for a better price.

In the present column, we will discuss several aspects of the company that we believe suggests there is value in this name once again following the sell-off the stock is experiencing. While the competition has been gaining some market share in the retail space according to IBIS data (subscription required to see full data), AutoZone still has an opportunity to control the commercial markets in our opinion and potential investors should focus here. Further, the company continues its tremendous buyback which ensures additional earnings per share growth. We believe that as the stock retraces toward $800, investors should closely follow the name, and consider acquiring shares of this quality company at a fair price.

Our thoughts on fiscal Q1 performance

In our opinion this sell-off is being driven by the macro environment and the fact that the DOW is down 1500 points in two sessions. Let folks take profits here and be prepared to start stepping in around $800. The company is crushing sales expectations and even exceeding our bullish margin expectations on the back of

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This article was written by

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AZO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We recently took profit as outlined with our trading service, but plan to reenter under $800

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