Stockchase Opinions

Karen Firestone, CEO, Aureus Asset Management O'Reilly Automotive Inc ORLY-Q WEAK BUY Sep 14, 2022

A great performer this year. Offers nice cash flow and stable growth. Not a cheap stock, though. She still owns a position, but smaller than before. She's not worried that people will drive less to work, because people are still working hybrid. More important is whether people hold onto their existing cars for longer. Demand for repairs remains.
$693.430

Stock price when the opinion was issued

Automotive
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BUY
Be very selective in consumer; this is how he plays this sector. These car suppliers should see continued demand from an again car fleet. Stock is not overly expensive, while business is phenomenal.
BUY ON WEAKNESS
Insulated from online competition. Good balance between the DIY and professional markets. Key is distribution, and they have a wonderful network. Exceptionally well run. Tons of cashflow. Wouldn't own in this environment. High valuation, wait for a pullback. At the right price, perfect candidate for a legacy hold for the grandkids.
PARTIAL SELL

It's outperformed the market the past year and has had a good run. People were driving more, but maybe that's played out. has just trimmed it. Still likes it.

TOP PICK

Largest in its space. $17B USD forecast 2024 revenue. Grew revenue last 5 years by 10.5%. Long-term tailwinds, as growing need for maintenance and repairs due to aging US automotive fleet. With an eye to interest rates and the economy, people have been holding onto their cars for longer. Resilient business. Increased share buybacks. He expects 12% EPS growth rate for next few years. No dividend.

(Analysts’ price target is $1036.26)
PARTIAL SELL

A defensive grower in the consumer space. Has taken some profits because its at all-time highs.

BUY ON WEAKNESS

Generally, retail is a tough industry. Wary of retail that's not specialty. Look at HD and ORLY, which are specialty retail, but wait for a pullback.

PAST TOP PICK
(A Top Pick Jan 11/24, Up 27%)

With the exchange rate, the return is actually higher for Canadian investors. PEG ratio got expensive for him, he sold. Trades at 27x PE, with 9-10% growth rate. Likes it long term. Opening new locations in US and Mexico. 200-day and 200-week MAs moving higher.

BUY

Used cars should do well after all these tariffs, which will make new cars more expensive and used ones (and repairs on existing cars) more attractive. Has a great record outperforming the S&P, a beautiful chart. Their last quarter was mixed, though fine to him. ORLY had a big same-store sales beat and smaller total revenue beat. Earnings were a little light, and the full-year forecast disappointed, but they always lowball guidance. Despite the huge sell-off this week, this stock is still up for the year.

BUY

This and AutoZone have emerged as a strong duopoly in car retail. Once the auto tariffs kick in, these stocks will thrive--new cars will become expensive, so people will need car parts to maintain their existing cars. The company has bought back a ton of shares, shrinking the share count by 65% since 2010.