Advance Auto Parts wins out over AutoZone in BofA's auto retail check
Bank of America thinks shares of Advance Auto Parts (NYSE:AAP) will outperform peer AutoZone (AZO) as macro factors come into play.
Analyst Elizabeth Suzuki and team point to increased risk for AutoZone (AZO) if do-it-yourself demand is dropping. For AAP, the DIY channel represents about 40% of sales, which is noted to be among the lowest exposure of the peer group and well-below the 75% DIY exposure for AAP.
AutoZone (AZO) has outperformed Advance Auto Parts (AAP) so far this year, but that has led to less attractive valuation, per BofA.
"With AZO shares trading at close to its peak 1-year forward P/E multiple at above 18x vs. its long-term average of 15x, we see downside risk to the stock heading into its 4Q earnings release."
AutoZone (AZO) is expected to report earnings next week.
BofA has a Buy rating on AAP and an underperform rating on AZO.
The Seeking Alpha Quant Rating on AAP is at Buy, while AZP is slotted at Hold.