Stockchase Opinions

Chris Blumas O'Reilly Automotive Inc ORLY-Q BUY ON WEAKNESS Apr 18, 2024

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.

$1104.970

Stock price when the opinion was issued

Automotive
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SELL

Had announced consumer trends were not what they had expected them to be, and the stock got punished 20% in one day with some follow through. They’ve had consistent buybacks instead of dividends. You are going to have to wait for a long time for it to recover, because there are many people in the name who are waiting to get their money back. Every time it creeps up a little more, it will hit more Selling.

COMMENT
Has watched it before and has been a good name over time. However, you are dependant on the consumer cycle.
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.
WEAK BUY
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.
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.

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.