Benzinga | Oct 19, 2020 12:46PM EDT

Raymond James Upgrades O'Reilly Automotive On Bright Prospects

While O'Reilly Automotive Inc's (NASDAQ:ORLY) near-term prospects for 2021 appear bright, its current stock valuation seems attractive for investors with long-term horizons as well, according to Raymond James.

The O'Reilly Analyst: Matthew McClintock upgraded O'Reilly Automotive's stock from Market Perform to Outperform, while establishing a price target of $550.

The O'Reilly Thesis: Management has recently expressed optimism around the company's sales growth remaining strong, even amid deteriorating macroeconomic conditions, McClintock said.

O'Reilly Automotive seems even better positioned to gain market share in the post-COVID era, since independents are likely to "face relatively worse inventory replenishment challenges in the current environment," the analyst wrote in a note.

He also expects the expected decline in discretionary purchases to benefit auto part retailers "from previously "unperformed maintenance" during challenging economic times."

"Lastly, we certainly expect the current trend of sequential improvement in vehicle miles driven growth to continue going forward, which likely benefits the DIFM business in an outsized manner relative to DIY," said McClintock.

ORLY Price Action: Shares of O'Reilly Automotive had risen by 0.66% to $470.07 at the time of publication Monday.

Photo credit: Michael Barera, from Wikimedia Commons