AutoZone (AZO +0.59%) shares are trading around $3,027 on Aug. 25. That's down 26.9% over the past year and 20% over the past six months, and the stock is hovering just 4.3% above 52-week lows.
For a company that just posted its best quarterly sales growth in three years, that decline invites a question: Is the market seeing a problem that the numbers aren't showing yet, or is this simply a valuation reset for a stock that ran hot?
NYSE: AZO
Key Data Points
What's weighing on the stock
AutoZone's stock is down for a couple of sensible reasons.
Foot traffic from do-it-yourselfers has been soft lately due to tight consumer budgets. A weirdly cool, wet May killed demand for air conditioning parts right when summer heat usually kicks that category into gear. Recent quarters saw sharply higher revenue growth as inflation and tariff costs drove up unit prices. Now, AutoZone is guiding to lower top-line growth as the same extra-high sales are becoming the basis for tougher year-over-year comparisons.
Put those headwinds together, and it's easy to see why growth-focused investors got nervous even as headline sales rose 8.4% in the third quarter of fiscal year 2026, which ended May 9.
AutoZone vs. O'Reilly
Here's the part that gets me excited, though: Look at AutoZone next to its biggest rival, O'Reilly (ORLY -0.40%). AutoZone trades at a forward P/E of 17.3 versus O'Reilly's 24.7, and O'Reilly's stock has barely budged this year. So this isn't some industrywide freakout; the market specifically discounted AutoZone.
Meanwhile, AutoZone's commercial business posted 10.4% sales growth last quarter. Management sees a serious growth opportunity in this segment, which accounted for just 29% of last quarter's total sales.
"We continue to gain share, and we have really low share on the commercial side of the business," CEO Philip Daniele said on the earnings call.
The MegaHub advantage
The engine behind that effort is MegaHubs. AutoZone's largest stores are stocked with over 100,000 parts to restock nearby locations in a snap. The company has 156 of these hubs today, including 14 openings in Q3 alone. That's about halfway to the long-term target of roughly 300 MegaHubs.
On top of all that, the board just tacked on another $1.5 billion to the buyback authorization in June. That's about 3% of AutoZone's current market cap.
And here's a fun wildcard. AutoZone has never split its stock, which trades at more than $3,000 per share. A split wouldn't actually change anything that matters; you'd just own more shares worth proportionally less each, with the same total value.
But there's a practical case for it anyway. If your brokerage doesn't do fractional shares, a split gives you way more flexibility to buy exactly the amount you want instead of aligning your buys with that beefy share price. AutoZone hasn't signaled any plans here, but given how high the share price has climbed, it's the kind of move that wouldn't shock anyone.
Image source: The Motley Fool.
Don't let the sliding chart scare you
Sure, there are real things to watch: Inflation's cooling off, international sales are sluggish, and traffic needs to firm up. But a slowdown caused by weird weather and challenging year-ago comparisons isn't the same as a business losing its grip.
The MegaHub strategy makes sense, and I can't complain about the lower buy-in pricing. At the very least, I'd gladly buy AutoZone's stock before O'Reilly's right now.
