| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 1978.39 | -48 |
| Intrinsic value (DCF) | 153.22 | -96 |
| Graham-Dodd Method | 477.20 | -88 |
| Graham Formula | 2133.38 | -44 |
AutoZone, Inc. (NYSE: AZO) is a leading retailer and distributor of automotive replacement parts and accessories in the United States, Mexico, and Brazil. Founded in 1979 and headquartered in Memphis, Tennessee, AutoZone operates over 6,700 stores, offering a comprehensive range of products for cars, SUVs, vans, and light trucks. The company provides new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products, catering to both DIY customers and commercial clients. AutoZone’s extensive product portfolio includes A/C compressors, batteries, brake systems, engine components, and diagnostic tools, along with convenience items like snacks and car care products. The company also delivers value-added services such as commercial credit programs, same-day delivery, and online sales through autozone.com. With a strong focus on customer service and a vertically integrated supply chain, AutoZone maintains a dominant position in the $50+ billion automotive aftermarket industry. Its ALLDATA subsidiary further strengthens its market presence by offering industry-leading automotive diagnostic and repair software. AutoZone’s consistent revenue growth, high-margin business model, and disciplined capital allocation make it a key player in the specialty retail sector.
AutoZone presents a compelling investment case due to its resilient business model, strong free cash flow generation, and leadership in the automotive aftermarket industry. The company benefits from a large and fragmented market, with aging vehicle fleets driving sustained demand for replacement parts. Its asset-light strategy, efficient supply chain, and commercial sales growth (DIFM segment) provide revenue diversification. However, risks include cyclical exposure to consumer discretionary spending, competitive pressures from e-commerce players, and potential margin compression from wage inflation. AutoZone’s zero-dividend policy and aggressive share buybacks may deter income-focused investors, but its consistent EPS growth (diluted EPS of $149.55 in FY2024) and high ROIC justify its premium valuation. With a low beta (0.443), AZO offers defensive characteristics in volatile markets.
AutoZone’s competitive advantage stems from its scale (largest store count in the U.S. aftermarket), vertically integrated distribution network, and dual focus on DIY and commercial customers. Its hub-and-spoke distribution model ensures rapid inventory turnover and high in-stock rates, critical for professional repair shops. The company’s proprietary brands (e.g., Duralast) provide higher margins than national brands, while its commercial sales (~30% of revenue) lock in steady demand from repair businesses. Unlike pure e-commerce competitors, AutoZone’s physical stores act as fulfillment centers for online orders, enabling same-day pickup and returns. However, it faces intensifying competition from Amazon’s automotive vertical and OEM dealership networks, which leverage telematics to capture aftermarket demand earlier. AutoZone counters this with its ALLDATA repair software, which creates stickiness with professional technicians. Its debt-heavy balance sheet ($12.4B total debt) funds share repurchases but limits M&A flexibility compared to peers like O’Reilly. Geographic concentration (88% U.S. revenue) exposes it to regional economic downturns, whereas rivals like Genuine Parts have more international diversification.