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Citi thinks O’Reilly Automotive will buck the broader weakness in the retail market. The bank upgraded the auto parts retailer to buy from neutral and raised its price target to $1,040 per share from $983. Citi’s new forecast suggests 15.9% upside for the stock from Wednesday’s closing price. “We think the recent pullback in the shares presents an attractive buying opportunity for the stable, defensive retail stock,” analyst Steven Zaccone wrote in a Thursday note. “Our target multiple is also at a slight premium to the market share leaders retail basket given the recession-resistant aspect of ORLY’s business and consistent margin execution.” Zaccone pointed to the stability of auto parts as an “impressive” space within retail at a time when he expects to see less consumer spending on discretionary categories, specifically in the second half of 2023 and into next year. O’Reilly has been gaining market share by a wide margin while competitors are experiencing certain hiccups, Zaccone added, saying that Advance Auto Parts is losing market share and AutoZone is working through internal execution issues. “ORLY is the most consistent of the auto parts retailers historically. We expect that execution over the near to medium term,” the analyst said. Citi expects modest upside to O’Reilly’s earnings per share in the second half of 2023 and 2024 compared to Wall Street’s expectations, based on the company’s strong top-line trends, stable margins and consistent share repurchases. O’Reilly shares rose more than 1% in premarket trading. The stock is lagging the broader market this year, rising 6.3% while the S & P 500 is up 11%. Over the past 12 months, however, shares are up more than 22%. ORLY 1Y mountain ORLY in past 12 months — CNBC’s Michael Bloom contributed to this report.
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