• Auto parts retailers continued to take a hit after O’Reilly Automotive’s (NASDAQ:ORLY) Wednesday warning that Q2 same store comps came in well below guidance; during the following three days, ORLY fell 21.6% to end the week at a new 52-week low, Advance Auto Parts (NYSE:AAP) -13.9% and AutoZone (NYSE:AZO) -12.3%.
  • BofA Merrill Lynch weighed in today, downgrading ORLY and AZO to Neutral from Buy and AAP to Underperform from Neutral – with respective price targets of $200, $575 and $90 – as the sector is suffering from various industry-wide trends and entering a period of lower sustained growth after a period of strong performance.
  • While BAML thinks AAP is in the weakest position among all auto parts names and is the most inconsistent performer in the group, Jefferies upgrades shares to Buy from Hold, arguing the risk-reward now looks favorable given its YTD 39% drop and that investors are overlooking the company’s long-term potential.
  • Meanwhile, Barclays maintains its Outperform rating on ORLY, believing the recent weakness may underestimate the long-term benefits of the company’s best in class business model, but cuts its price target to $234 from $300; the firm lowers its target for AZO to $710 and AAP to $93.
  • Quad 7 Capital has previously opined AutoZone is a fantastic value here
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