The following excerpts explain why Zacks senior automobile industry analyst Paul Raman, CFA remains neutral on AutoZone, Inc. (AZO), one of the leading retailers of automotive parts and accessories:
'AutoZone has significant cash flow and plans to expand its square footage growth. AutoZone has taken steps to maintain a mid-single-digit square footage growth rate by opening new stores every year. Category management efforts and supply chain initiatives undertaken by AZO are likely to be offset by higher staffing costs.
'Moreover, AZO is suffering from sluggish same store sales. We maintain our Hold recommendation on AutoZone, with a six-month target price of $118.00.
'Currently, shares of AutoZone, Inc. are trading at 10.8x our 2008 EPS estimate of $9.77. Category management efforts and supply chain initiatives have been undertaken by the management, which makes us optimistic about the stock movements. However, owing to rising debt levels, competition and high gas prices, we keep the stock a Hold. Our six-month target price is 12.1x our 2008 EPS estimate.'
Read the full analyst report on AZO.
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