Deutschse Bank downgraded
shares of O'Reilly Automotive Inc (NASDAQ: ORLY) and lowered its price target, citing three reasons.
No. 1: Do-It-Yourself Undos
Although analyst Mike Baker believes the company will remain the leader in both comps and operating margins, he thinks the
incremental competition in the DIY side of the business could limit earnings and revenue beats.
The analyst clarified that Amazon.com, Inc. (NASDAQ: AMZN) has about 6.2 percent of the $54 billion DIY auto parts after-market
industry. If O'Reilly strives to match Amazon's
lower prices, the analysts think there could be an issue with gross margins.
No. 2: Headwinds Abound
Secondly, the firm noted that several bigger picture trends, including miles driven and vehicle aging, are either turning less
positive or could be acting as headwinds in the space.
No. 3: Valuation Loses Appeal
Thirdly, the firm sees less upside from current levels, as the earnings per share growth slows, given that the stock is already
above valuation.
The rating on the shares of O'Reilly goes to
Hold from Buy, while the price target is reduced to $273 from $315, based on a still healthy multiple of 20 times the estimated
earnings per share for 2018.
At the time of writing, O'Reilly shares were sliding 2.25 percent to $263.23.
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Latest Ratings for ORLY
| Date |
Firm |
Action |
From |
To |
| Apr 2017 |
Deutsche Bank |
Downgrades |
Buy |
Hold |
| Apr 2017 |
Cleveland Research |
Downgrades |
Buy |
Neutral |
| Jan 2017 |
Guggenheim |
Initiates Coverage On |
|
Buy |
View More Analyst Ratings for
ORLY
View the Latest Analyst Ratings
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