Oppenheimer analysts downgraded AutoZone (NYSE:AZO) and O'Reilly Automotive (NASDAQ:ORLY) to Perform from Outperform in a note Friday.
The analysts told investors in a note that their firm believes the tide is turning for auto parts retail. The ORLY price target was cut to $930 from $1,000. AZO has not been assigned a price target.
"As we sharpen our focus on 2024 and evaluate more closely ongoing shifts within discretionary, we assume a less upbeat stance upon auto parts retail," the analysts said.
"To be clear, in our view, underlying fundamentals for auto parts retail and leading, well-positioned players within the space, remain solid. That said, pandemic-related tailwinds for the group are likely to continue to fade, thereby undermining prospects for sales and EPS upside at the chains and outsized money flows into shares," they explained.
While current Street forecasts for AZO and ORLY "appear largely reasonable," Oppenheimer said they are now more hard-pressed to envision multiples for shares climbing meaningfully from current levels.