AutoZone could be a good hedge for investors seeking protection from ongoing tariff stress, according to Oppenheimer. The investment firm upgraded shares of the automotive parts retailer to an outperform rating from perform. Analyst Brian Nagel’s new price target of $4,600 implies that shares of AutoZone could rise 23% from their Thursday closing price of $3,732.92. AutoZone stock has gained nearly 17% this year. AZO 1Y mountain AZO 1Y chart The analyst pointed to AutoZone’s historic valuation discount as an especially compelling reason to buy the stock now. “We assume a more constructive, nearer-term stance towards auto parts retail, and upgrade AutoZone to Outperform,” Nagel wrote. “A now historically-discounted relative valuation for AZO makes for an intriguing buying opportunity, particularly as tariff-driven sales and profit tailwinds take hold.” Nagel also highlighted that the auto parts retail category looks particularly well positioned amid a backdrop of mounting trade tensions. Companies within this sector are especially noted for their historically significant pricing power and prospects for higher new car pricing to cause consumers to try to maintain their existing vehicles for longer than they would otherwise. “We increasingly look upon auto parts retail and well-positioned chains, within the segment, as attractive safe havens, amid ongoing macro turmoil, owing to: underlying economic resiliency; potential to capitalize upon elevated input costs; improving market share opportunities; solid capital positions; and compelling structural attributes,” the analyst wrote. Nagel added that AutoZone’s focused pivot into the commercial sector should actually benefit from these tariffs. Commercial sales accounted for approximately 30% of the company’s total domestic revenues in the second quarter. “Following a prolonged period of pandemic-boosted, outsized expansion, commercial sales growth at AZO moderated lately,” he said. “Tariff-related tailwinds, namely same-SKU inflation and easing competition, should bolster commercial sales expansion at AZO, making for an underlying catalyst for shares.”
