Jack Joins the High Miles Club. Is AutoZone a Buy? | Barron's Streetwise
Why It Matters
AutoZone’s undervalued stock and resilient demand for parts make it a compelling defensive bet as inflation eases and high‑mileage vehicles remain prevalent.
Key Takeaways
- •Older cars staying longer boost auto parts demand
- •AutoZone revenue grew 60% since 2020, outpacing peers
- •Stock price fell 24% despite strong fundamentals, creating buying dip
- •Inflation passed to consumers, but expected to ease, slowing growth
- •Amazon threat minimal; in‑store advice keeps customers loyal
Summary
The Barron's Streetwise podcast examines whether AutoZone is a buy amid a surge in high‑mileage vehicles and a booming auto‑parts market.
Jack How notes that the average age of U.S. cars has risen to 13 years, driving demand for replacement parts. AutoZone’s revenue jumped from $12.6 billion in FY2020 to an estimated $20.5 billion this year, a 60% increase, while O’Reilly posted similar growth. Despite this, AutoZone’s shares have slipped 24% over six months, creating a valuation gap.
Analyst Michael Baker explains the disconnect: “Expectations have been high, but inflation that boosted margins is expected to taper,” and adds that most purchases still require in‑store advice, limiting Amazon’s impact. He calls the current price dip “an opportunity to buy the dip.”
With a forward P/E of 17.1 versus a 5‑year average above 19, AutoZone appears undervalued. If inflation pressures ease and the high‑mileage trend persists, the stock could rebound, offering a defensive play amid tech‑heavy market rotations.
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