Bank of America thinks shares of Advance Auto Parts ( NYSE: AAP ) will outperform peer AutoZone ( AZO ) as macro factors come into play.
Analyst Elizabeth Suzuki and team point to increased risk for AutoZone ( AZO ) if do-it-yourself demand is dropping. For AAP, the DIY channel represents about 40% of sales, which is noted to be among the lowest exposure of the peer group and well-below the 75% DIY exposure for AAP.
AutoZone ( AZO ) has outperformed Advance Auto Parts ( AAP ) so far this year, but that has led to less attractive valuation, per BofA.
"With AZO shares trading at close to its peak 1-year forward P/E multiple at above 18x vs. its long-term average of 15x, we see downside risk to the stock heading into its 4Q earnings release."
AutoZone ( AZO ) is expected to report earnings next week.
BofA has a Buy rating on AAP and an underperform rating on AZO.
The Seeking Alpha Quant Rating on AAP is at Buy , while AZP is slotted at Hold.
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Advance Auto Parts wins out over AutoZone in BofA's auto retail check