UBS bullish on O’Reilly stock, citing resilience and long-term market share gains By Investing.com



On Friday, UBS demonstrated confidence in O’Reilly Automotive (NASDAQ: ORLY) stock, raising its price target to $1,400 from $1,375 and maintaining a Buy rating. The firm acknowledged the company’s recent underperformance and consecutive quarters of downward revised guidance but emphasized the stock’s resilience amid industry challenges.

The resilience of O’Reilly Automotive is attributed to a few key reasons. Despite the automotive industry facing soft demand and various disruptions, including hurricanes and cybersecurity incidents like those involving CrowdStrike (NASDAQ:), UBS expects these conditions to be temporary. The firm remains optimistic about the industry’s fundamentals, noting an aging vehicle population and low single-digit growth in vehicle miles traveled, which suggest a potential recovery to historical growth rates.

UBS also highlighted that O’Reilly Automotive is well-positioned to gain market share in the future. The company’s investments in modernizing its supply chain, expanding its inventory, and increasing store growth are expected to enable it to outpace industry growth over time.

Furthermore, UBS believes that O’Reilly Automotive presents a superior risk/reward profile compared to other retailers in the current macroeconomic climate. The firm anticipates that O’Reilly’s margins will be more stable than those of its competitors, which should support the stock’s ongoing strength.

In summary, UBS’s revised price target reflects their belief in O’Reilly Automotive’s capacity to navigate through the current industry headwinds and emerge stronger, with solid growth prospects and a robust margin profile.

In other recent news, O’Reilly Automotive has reported a slight increase in comparable store sales for Q3 2024, despite industry challenges and weather-related disruptions. Following the company’s third-quarter earnings release, Jefferies maintained a positive stance on O’Reilly Automotive, raising the stock’s price target to $1,400 from $1,260. The company reported earnings per share (EPS) of $10.55, falling short of both Jefferies’ estimate of $10.83 and the consensus of $10.98.

Furthermore, O’Reilly Automotive’s management has revised its 2024 guidance downwards, now expecting EPS to be between $40.60 and $41.10 and same-store sales growth to be in the range of 2-3%. The company opened 47 new stores in Q3, bringing the total to 111 for the year, with plans to reach 190 to 200 store openings for 2024. Despite pressures, management is confident in long-term industry growth and plans to enhance supply chain capabilities with new distribution centers.

In addition, the company’s executives addressed concerns about tariffs, indicating readiness to pass costs to consumers, and noted a reduction in reliance on Chinese suppliers. These are among the recent developments in O’Reilly Auto (NASDAQ:) Parts’ business strategy and performance. Despite the tempered guidance for the upcoming year, analysts believe that positive trends in underlying demand drivers could support the company’s performance moving forward.

InvestingPro Insights

O’Reilly Automotive’s recent performance aligns with UBS’s optimistic outlook. According to InvestingPro data, the company’s stock is trading near its 52-week high, with a price at 98.25% of its peak. This resilience is further evidenced by the company’s impressive 37.13% one-year price total return as of the latest data.

InvestingPro Tips highlight that O’Reilly has been profitable over the last twelve months and analysts predict continued profitability this year. This supports UBS’s view on the company’s ability to maintain strong financial performance despite industry challenges. Additionally, the company’s high return over the last decade and strong return over the last five years underscore its long-term success in navigating market fluctuations.

However, investors should note that O’Reilly is trading at a high P/E ratio relative to near-term earnings growth, with a current P/E ratio of 29.69. This valuation metric suggests that the market has high expectations for the company’s future performance, aligning with UBS’s bullish stance.

For those seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for O’Reilly Automotive, providing deeper insights into the company’s financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.





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