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O'Reilly Automotive: A Big Shadow On Its Horizon

Aug. 18, 2023 12:02 PM ETO'Reilly Automotive, Inc. (ORLY)AZO15 Comments
Miguel Daban profile picture
Miguel Daban


  • O'Reilly Automotive is the largest player in the auto parts industry with a strong business model and good financials.
  • O'Reilly has several long-term risks that put its terminal value and long-term cash.
  • The possible solution for fixing these problems is not easy to execute.

Car components


O'Reilly Automotive (NASDAQ:ORLY), ORLY from now on, is the biggest player in terms of market cap in the auto parts industry. Despite having a great business model with very good financials, competitive advantages, and competent management aligned with shareholders, there are some long-term

This article was written by

Miguel Daban profile picture
I am a young enthusiast for investment. I like companies with strong competitive advantages, aligned management teams, high FCF generation, and high ROIC with many reinvestment possibilities. I am looking for the best businesses in the world in order to create a long term portfolio that can outperform the market.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (15)

Tao Jaxx profile picture
A sell rating on ORLY? are you serious? And because EV risk?
Go ahead and short it lol.
A gem of a stock, making dough with other people's money: you mentioned negative working capital but failed to note negative shareholders' equity due to constant share repurchase. (Not sure you checked the 10Qs)

Please short it so you can single-handedly roll back the dearth of shares created by stock repurchase.
I see you're in your second week of contributing. All of them TWO weeks. That explains it.
Investor Dev Research profile picture
Nice article, good job mate!
Keep in mind that EV penetration will be slow and those who don’t want them will keep their cars longer or turn to the used car market if necessary. Both good for ORLY.
Miguel Daban profile picture
@dstb Yes, that is true, but still, there exists a terminal value risk that prevents me from investing in it.
@Miguel Daban
Fair enough. Don’t know how old you are but I figure EVs will not reach a significant enough penetration in my lifetime. They are not ready for prime time and more and more people will figure that out and push back.
Why would you sell such a great company when they have 20 + years of strong sales ahead ?? We will still have 300-400m gas ⛽️ vehicles on the road in US by 2043 , I'm betting for sure they will expand internationally within 2-3 years. They have the best management team I've ever seen , they are thinking ahead, trust me ! Worked there 21 years /retired , and know most of the Oreillys very well . Long ORLY since $40 , and I predict $1,450 a share by 2030 .
@Gadzman_33 Good point, but your target is very bearish. It is more likely be $2500 a share, assuming 15% CAGR from here.
@LongTermPortfolio I like your math better , but that's a huge increase in just 7 years . Time will tell .......
Miguel Daban profile picture
@Gadzman_33 Thank you for the information. I loved ORLY's corporate culture when I researched it. Sadly, we do not have ORLY here in Spain. I agree with you on many points, and as I stated in the article, I would not be surprised to find many people loving it.
They'll figure it out over time...We own both stocks but AutoZone is a much better run company! Longz ORLY AZO! :-)
@magenta17 Auto Zone is well managed, but they are not as good as Oreillys management!
Miguel Daban profile picture
@Gadzman_33 I agree with you. I found ORLY's management team to be top-notch.
@Miguel Daban Yeah , they haven't made any missteps that I recall ? AZO would have been a good investment too , I remember the stock at $20! lol
As an ORLY shareholder, one of the things about the company I like is that all of their sales are in North America. That eliminates international political and economic issues that can affect the stock outside of the health of the business. As an example, look what the PRC has done to BABA. They have made Chinese companies uninvestable.
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