AutoZone, Inc. (AZO) shares rose 2% during pre-market trading before giving up ground at the open after Morgan Stanley raised its price target to $1,505 per share.

Key Takeaways

  • AutoZone shares rose in pre-market trading after Morgan Stanley raised its price target to $1,505 per share.
  • Analyst Simeon Gutman predicts a big beat during the fiscal fourth quarter driven by warm weather, stimulus spending, and the COVID-19 lockdown.
  • The stock could see significant movement on Tuesday, Sept. 22, 2020, when it reports fourth quarter earnings.

Morgan Stanley's Simeon Gutman reiterated an Overweight rating on AutoZone shares and raised his price target from $1,140 to $1,505, citing expectations for strong sales and a "big beat" during the fiscal fourth quarter. Gutman believes that warm weather boosted store traffic, stimulus checks led to a rise in spending, and COVID-19 lockdowns drove pent-up demand and more time to work on the car during the fourth quarter.

Tip

An overweight investment is an asset or industry sector that comprises a higher-than-normal percentage of a portfolio or an index. An investor might choose to devote a greater portion of the portfolio to a sector that seems particularly promising, or an investor might go overweight on defensive stocks and bonds at a time when prices are volatile.

Earlier this week, Wells Fargo's Zachary Fadem similarly reiterated an Overweight rating on AutoZone and raised his price target from $1,300 to $1,375, saying that the "historic" fourth quarter results and ample positive drivers could push the stock higher. Fadem added that AutoZone's addressable market has expanded and that market share gains could accelerate.

Chart showing the share price performance of AutoZone, Inc. (AZO)
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From a technical standpoint, AutoZone stock continues to trend above its 50-day moving average at $1,190.39 and below its highs of around $1,250. The relative strength index (RSI) appears neutral with a reading of 55.81, while the moving average convergence divergence (MACD) provides few hints into future price direction. These indicators point to sideways performance over the coming sessions until there's a meaningful catalyst.

Traders should watch for significant movement during and around the company's fourth quarter earnings report on Tuesday, Sept. 22, 2020. If the stock breaks out, traders could see a move toward trendline resistance at around $1,300. If the stock moves lower, traders could see a breakdown from the 50-day moving average toward the 200-day moving average and reaction lows of around $1,100, although that scenario seems less likely to occur.

The Bottom Line

AutoZone shares rose during pre-market trading on Thursday before giving up ground at the open following Morgan Stanley's sharply higher price target. Analysts predict strong fourth quarter financial results on Sept. 22, which could serve as a meaningful catalyst for the stock to move higher or lower.

The author holds no position in the stock(s) mentioned except through passively managed index funds.