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Goldman Sachs says buy AutoZone, a ‘defensively positioned’ stock to weather inflation

Inflationary pressures, dwindling supply and a slowdown in spending continues to hit the auto industry. But AutoZone is well-situated to weather the storm, according to Goldman Sachs. “We are upgrading AZO to Buy (from Neutral) as we view the company as defensively positioned in the current environment as the majority of auto part sales (~83% for FY21) are non-discretionary, and as demand remains relatively inelastic, allowing AZO to pass through inflationary cost increases,” wrote analyst Kate McShane in a note to clients. AutoZone also stands to benefit from its exposure to do-it-yourself and demand for older vehicle maintenance as new auto supply remains under pressure, she said. Meanwhile, the company’s ‘do it for me’ segment is gaining share from companies coping with inventory and staffing troubles, McShane wrote. Shares of AutoZone are up 3% this year and could gain more than 6% from Friday’s close based on Goldman Sachs’ fresh $2,296 price target. The stock was trading up 2.4% in premarket trading. — CNBC’s Michael Bloom contributed reporting

A man walks outside an AutoZone store in Albuquerque, New Mexico.
Sergio Flores | Bloomberg | Getty Images

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