Brave call after the double top and earnings miss.
Now give us your entry, stop and target exit.
AZO
- Thread starter vanzandt
- Start date
Brave call after the double top and earnings miss.
Now give us your entry, stop and target exit.
Well I wrote that in January of 2017, and at the time it was around $750, and it dropped to near $530ish shortly thereafter. About a 30% drop. No oops there, Sorry.
And not to nit-pick on you and what you wrote.... but your your "Amazon was a great short"... well it went from around $750 at the same time to over $2000 at its highs. And it didn't look back a bit. That's not a great short. So whatever on that.
Now.... when you say "I don't know how the customers think or operate"... I mean with all due respect, I don't think I necessarily need to, that's what quarterly reports are for. I can look at yoy same store sales @ 3% and a mere 60 new stores opened in the last 12 months.... and it doesn't take much to figure out a PE north of 20 is not justified.
Ohhhh, but they grow earnings by buying back shares? Gotcha. Good plan.
"But VZ...where do they get the money to buyback shares if sales are growing at meager 3% and taxes, labor, real estate, utilities, insurance... all keep going up?"
That's easy. We cut the pension plan, staff the stores with fewer employees with a lower skill-set so we don't have to pay them as much... and the rest.... no worries... We borrow it!
Maga!
Now lets look at that PEG ratio with the share price overlayed and what happened to the stock the last time it got this high. Hmmm.
And last but not least.... Gross margins are at 54%, which is incredible really. (Are they selling alternators or software?)
So 54% sounds great... but its not. 54% gross margins leaves HUGE room underneath for competition, both online and from fellow bricks and mortar. Those margins WILL contract as ORLY, NAPA, Pep Boys, Advanced, etc, all cut price to win those "shops" that I don't understand.
AZO has nothing that rare in its inventories that the Advanced or O'Reilley next door doesn't have. And actually, the hard to get stuff is usually at NAPA, as are the foreign parts. And if its not in stock guess what... next day. Imagine that. Just like Rock Auto. Except they are making 20% gross margin. Get the idea?
So DT.... you load the boat if you want. Its down almost $100 from its high a few weeks ago. Its a steal.
Ps... why do you care anyway btw? I mean its a friggin stock. They're like streetcars and women. Why fall in love with a stock? Unless you work there I guess. Or you own a ton as a PM.... in which case I'd lighten up on that position.
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Picked a random part. Both new, not remanufactured.
Prime will have it here by Saturday with free shipping.
AZO is $390 with tax.
69% savings.
Someone working for $15/hr will wait a day to save $160... 69%.
Let alone people in the flyover states that are lucky to be earning $10/hr. Think they won't wait a day?
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But you say the shops won't care. Ok, maybe maybe not. If I was running a shop I'd give my customers a choice. If they don't need the car... lets wait a day. Good way to build a loyal customer base.
But all that said... lets go back to to my picture on page 1.
If a shop needs it in an hour, does it really make sense to have 17 AZO's within 25 miles of each other? Wouldn't it be more efficient to have just one warehouse? Pretty sure you can get from point A to point B anywhere in that metro area in an hour. If shops are your bread and butter... that is not the way to run a railroad.... with 17 money sucking locations.
Whatever. We've beat this horse to glue.
Prime will have it here by Saturday with free shipping.
AZO is $390 with tax.
69% savings.
Someone working for $15/hr will wait a day to save $160... 69%.
Let alone people in the flyover states that are lucky to be earning $10/hr. Think they won't wait a day?
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But you say the shops won't care. Ok, maybe maybe not. If I was running a shop I'd give my customers a choice. If they don't need the car... lets wait a day. Good way to build a loyal customer base.
But all that said... lets go back to to my picture on page 1.
If a shop needs it in an hour, does it really make sense to have 17 AZO's within 25 miles of each other? Wouldn't it be more efficient to have just one warehouse? Pretty sure you can get from point A to point B anywhere in that metro area in an hour. If shops are your bread and butter... that is not the way to run a railroad.... with 17 money sucking locations.
Whatever. We've beat this horse to glue.
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This is an AZO thread Einstein. When Amazon signaled their intentions (to enter commercial auto parts), it (AZO) was an easy short. Perhaps you'd care to explain why GPC wasn't such an easy short.
Shop A orders a part at 8AM and it takes an hour to travel to his shop. Guess what-Mr. No Clue about the industry- it takes an hour to get back. Too bad if Shop B calls at 8:15 eh? Those money sucking locations are also ringing the register in the front of the store. Most are 55/45 front to back of shop balance. Front has the bigger margins btw.
Again, clueless. Every store you mentioned has 2,3 or 4 shuttle runs per day. Not in stock at 8AM, it will either arrive at 10, 1:30 or 4 PM. Not next day, sorry.
Stupid is as stupid does. Just wait until you need to warranty a part. Who is going to pack up the bad alternator? The shop? For free? Where is the car going to sit while this process shakes out? In your bay? In your lot? Got a loaner for you customer because now his cheap part that you offered is going to tie up his car for 2 days. Good way to go out of business.
Stick to your quarterly reports if that works for you but don't pretend you know anything about this biz. Matter of fact, as strongly as you are trying make your case on this one, I suspect you don't know anything about the industries that you trade.
What's up with the name calling? You can't discuss a stock that you feel passionate about without that? Whatever. Besides, if you only trade breakouts, again, why do you even care?
But ok, every shop from here to eternity will use AZO and never order a part online. There, happy? Too bad that's only 20% of their revenue. 55/45 is way off.
About 80 percent of AutoZone's business comes from people repairing their own cars with the other 20 percent coming from professional mechanics.
https://www.cnbc.com/2018/07/16/aut...ght-in-battle-between-walmart-and-amazon.html
Now lets address that debt, PEG ratio, anemic organic growth, and ever increasing costs. Thoughts on that?
Online part sales will (estimated) double by 2022.
Those sales have to come from somewhere.
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He added that AutoZone is making a big push into serving commercial customers where there’s more potential growth.
The increasing technical complexity of cars means it is ever more difficult for ordinary customers to service what they own.
That bodes well for sales of parts on the commercial side. More sophisticated parts cost more money.
That's where your organic growth will come from.
The increasing technical complexity of cars means it is ever more difficult for ordinary customers to service what they own.
That bodes well for sales of parts on the commercial side. More sophisticated parts cost more money.
That's where your organic growth will come from.
Apology offered, sorry.
I care when people talk above their pay grade and got carried away.
Apology accepted. And its not about above paygrade, its (IMO)... a business is a business is a business. At least the kind that are listed on the NYSE and in the S&P 500. Its all a numbers game in the end.
Why AutoZone Stock May Downshift
Rising competition could lead to a breakdown.
Jan 28, 2020 at 6:31AM
AutoZone (NYSE:AZO) stock has steadily trended upward over the last two years. The company has benefited from Americans keeping their cars longer and buybacks have helped propel the stock to highs near $1,275 per share in early December.
However, even as the S&P 500 has risen to record highs, AutoZone stock has begun to drop. Moreover, both O'Reilly Automotive (NASDAQ:ORLY) and Advance Auto Parts (NYSE:AAP) trade at higher multiples. Although Genuine Parts Company (NYSE:GPC) trades at a similar valuation, its shareholders receive a dividend that yields 3% at current prices.
The rising stock price and lower valuation may attract investors. However, conditions within both the market and the company itself indicate that AutoZone stock could experience a dramatic reversal.
The growth of AutoZone stock
At first glance, one might wonder why AutoZone stock appears unattractive today. After all, it increased by 680% during the 2010s. Its archrival O'Reilly Automotive registered a return of 1,050% over the same period. Nonetheless, AutoZone became one of the best-performing retail stocks of the decade.
IMAGE SOURCE: GETTY IMAGES
Moreover, Americans tend to keep their cars longer than in the past. The average age of a running vehicle in the U.S. has reached a record of 11.8 years. That means Americans are choosing to repair older cars more often, likely using parts from a store like AutoZone, rather than buying new.
Furthermore, it operates in a recession-resistant business. People need a running vehicle in good times and in bad, and they will spend money to keep them running. A recession could also help AutoZone somewhat as fewer people can afford to replace their cars during harder times.
Why the growth may not continue
However, while a recession may not derail AutoZone stock, some auto industry trends could work against the auto parts retailer. For one, consumers have increasingly turned to electric vehicles. That causes problems for AutoZone and its peers. EVs have markedly fewer moving parts compared to gas-powered vehicles. That will mean that vehicles need less periodic maintenance. For AutoZone, that means lower demand for oil filters, fuel pumps, alternators, and the like.
Another trend working against AutoZone is demographics. Those between the ages of 18 and 34 spend more on auto repair and maintenance versus the average American. That bodes well for AutoZone... if this cohort chooses to own cars.
Unfortunately for the auto parts retailer, this generation more often chooses ridesharing or public transportation over car ownership. With fewer of them owning cars, many will not have a reason to set foot in an AutoZone store.
Further, in past years, auto parts sales enjoyed a degree of protection from e-commerce. When cars break down, owners want them running as soon as possible. This discourages long wait times for e-commerce deliveries, and often, price shopping.
However, Amazon (NASDAQ:AMZN) stoked fear when it quietly entered the industry a few years ago. With the online giant now offering one-day delivery with its Prime service, customers can now buy auto parts from Amazon without a long wait. This could cut AutoZone's profits as it adjusts its pricing and e-commerce strategy to compete.
AutoZone and its financials
Worse, lower profits could expose significant vulnerabilities in AutoZone stock. At first glance, its P/E ratio of just above 17.5 seems reasonable, particularly since analysts forecast average annual earnings increase of 10.95% per year over the next five years.
However, the balance sheet appears more troubling. The stockholders' equity, the value of the company after paying off debts and expenses, stands at around -$1.776 billion as of the last quarter. This has remained negative for years as management has prioritized stock buybacks over balance sheet stability over the last several years. During the previous reported quarter, the company repurchased $450 million worth of AutoZone stock and had $1.277 billion remaining under the latest share buyback authorization.
Should industry and demographic trends wipe out profits, it may have to reissue some of these repurchased shares simply to cover expenses. Such an occurrence could hurt AutoZone stock, which trades at just over $1,120 per share as of the time of this writing. This may explain why this stock trades at a discount to most of its peers. Despite a reasonable P/E ratio and steady profit increases, AutoZone stock is not as stable as it might appear.
Avoid AutoZone stock
Although AutoZone stock ran smoothly in the 2010s, the competitive landscape and the financial condition of the company indicate points of weakness. Admittedly, if Americans need fewer auto parts in the next few years, this will hurt both AutoZone and its peers.
Competition could also hurt AutoZone stock in another way. Due to aggressive stock buybacks, stockholders' equity has long remained negative. Should the company need to raise cash, its financial condition could lead to massive share issuance, significantly harming AutoZone stock.
AutoZone enjoyed tremendous success in the 2010s. However, with market conditions changing for the worse, investors need to take profits.
Rising competition could lead to a breakdown.
Jan 28, 2020 at 6:31AM
AutoZone (NYSE:AZO) stock has steadily trended upward over the last two years. The company has benefited from Americans keeping their cars longer and buybacks have helped propel the stock to highs near $1,275 per share in early December.
However, even as the S&P 500 has risen to record highs, AutoZone stock has begun to drop. Moreover, both O'Reilly Automotive (NASDAQ:ORLY) and Advance Auto Parts (NYSE:AAP) trade at higher multiples. Although Genuine Parts Company (NYSE:GPC) trades at a similar valuation, its shareholders receive a dividend that yields 3% at current prices.
The rising stock price and lower valuation may attract investors. However, conditions within both the market and the company itself indicate that AutoZone stock could experience a dramatic reversal.
The growth of AutoZone stock
At first glance, one might wonder why AutoZone stock appears unattractive today. After all, it increased by 680% during the 2010s. Its archrival O'Reilly Automotive registered a return of 1,050% over the same period. Nonetheless, AutoZone became one of the best-performing retail stocks of the decade.
IMAGE SOURCE: GETTY IMAGES
Moreover, Americans tend to keep their cars longer than in the past. The average age of a running vehicle in the U.S. has reached a record of 11.8 years. That means Americans are choosing to repair older cars more often, likely using parts from a store like AutoZone, rather than buying new.
Furthermore, it operates in a recession-resistant business. People need a running vehicle in good times and in bad, and they will spend money to keep them running. A recession could also help AutoZone somewhat as fewer people can afford to replace their cars during harder times.
Why the growth may not continue
However, while a recession may not derail AutoZone stock, some auto industry trends could work against the auto parts retailer. For one, consumers have increasingly turned to electric vehicles. That causes problems for AutoZone and its peers. EVs have markedly fewer moving parts compared to gas-powered vehicles. That will mean that vehicles need less periodic maintenance. For AutoZone, that means lower demand for oil filters, fuel pumps, alternators, and the like.
Another trend working against AutoZone is demographics. Those between the ages of 18 and 34 spend more on auto repair and maintenance versus the average American. That bodes well for AutoZone... if this cohort chooses to own cars.
Unfortunately for the auto parts retailer, this generation more often chooses ridesharing or public transportation over car ownership. With fewer of them owning cars, many will not have a reason to set foot in an AutoZone store.
Further, in past years, auto parts sales enjoyed a degree of protection from e-commerce. When cars break down, owners want them running as soon as possible. This discourages long wait times for e-commerce deliveries, and often, price shopping.
However, Amazon (NASDAQ:AMZN) stoked fear when it quietly entered the industry a few years ago. With the online giant now offering one-day delivery with its Prime service, customers can now buy auto parts from Amazon without a long wait. This could cut AutoZone's profits as it adjusts its pricing and e-commerce strategy to compete.
AutoZone and its financials
Worse, lower profits could expose significant vulnerabilities in AutoZone stock. At first glance, its P/E ratio of just above 17.5 seems reasonable, particularly since analysts forecast average annual earnings increase of 10.95% per year over the next five years.
However, the balance sheet appears more troubling. The stockholders' equity, the value of the company after paying off debts and expenses, stands at around -$1.776 billion as of the last quarter. This has remained negative for years as management has prioritized stock buybacks over balance sheet stability over the last several years. During the previous reported quarter, the company repurchased $450 million worth of AutoZone stock and had $1.277 billion remaining under the latest share buyback authorization.
Should industry and demographic trends wipe out profits, it may have to reissue some of these repurchased shares simply to cover expenses. Such an occurrence could hurt AutoZone stock, which trades at just over $1,120 per share as of the time of this writing. This may explain why this stock trades at a discount to most of its peers. Despite a reasonable P/E ratio and steady profit increases, AutoZone stock is not as stable as it might appear.
Avoid AutoZone stock
Although AutoZone stock ran smoothly in the 2010s, the competitive landscape and the financial condition of the company indicate points of weakness. Admittedly, if Americans need fewer auto parts in the next few years, this will hurt both AutoZone and its peers.
Competition could also hurt AutoZone stock in another way. Due to aggressive stock buybacks, stockholders' equity has long remained negative. Should the company need to raise cash, its financial condition could lead to massive share issuance, significantly harming AutoZone stock.
AutoZone enjoyed tremendous success in the 2010s. However, with market conditions changing for the worse, investors need to take profits.
Reading thru this thread, since I quoted it in another thread... at least I got that one right.
