Analyst Tunes Up These Auto Parts Stocks

Morgan Stanley waxed bullishly on the DIY auto parts sector

Managing Editor
Nov 6, 2018 at 10:15 AM
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Morgan Stanley just doled out price-target hikes to auto parts stocks AutoZone, Inc. (NYSE:AZO), O'Reilly Automotive Inc (NASDAQ:ORLY), and Advance Auto Parts, Inc. (NYSE:AAP). The analyst in coverage sees the shares of AZO, ORLY, and AAP outperforming in the next year, with tariff-related issues and e-commerce risks "at bay" for now. 

Morgan Stanley Sets Big Goal For AZO

Looking at AutoZone first, Morgan Stanley hiked its price target to $800 from $760, territory the stock has not traded at since January 2017. The brokerage waxed bullishly on AZO's valuation, and believes the company's comparable sales will improve over the next few quarters. At last check, AutoZone stock was up 1.2% to trade at $775, bringing its year-to-date gain to nearly 9%.

Puts have held a distinct advantage over calls in recent weeks, though. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows AZO with a 10-day put/call volume ratio of 1.62, which ranks in the 80th percentile of its annual range, meaning options traders have been more bearish than normal.

ORLY Bouncing Off Support

At last check, O'Reilly Automotive stock was up 2.3% to trade at $334.93, after Morgan Stanley upped its price target to $355 from $345. ORLY stock has been pulling back in recent weeks, but the dip appears to have found support at its 100-day moving average. Overall, the security boasts a 37% lead in 2018. 

In the options pits, near-term speculators have been more put-skewed than normal. This is according to O'Reilly's Schaeffer's put/call open interest ratio (SOIR) of 1.69, which ranks in the 80th annual percentile. 

AAP Named Morgan Stanley's "Top Pick"

Lastly, we have Advance Auto Parts, Morgan Stanley's top pick in the industry, and at last check it was up 1.9% to trade at $168.13. Morgan Stanley's price target is now $205, and the brokerage firm thinks the company will benefit from better revenue growth and margin expansion in the coming months. AAP snagged a fresh annual high of $171.50 back on Oct. 9, and the subsequent pullback has found support in its 80-day trendline. In the past 12 months, the stock has more than doubled. 

Once more, puts remain popular in the options pits, though. ISE/CBOE/PHLX data shows AAP stock with a 10-day put/call volume ratio of 2.62, ranking in the 92nd annual percentile. In other words, puts have been bought to open over calls at a faster-than-usual clip during the past two weeks


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