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O’Reilly Automotive (ORLY) stock forecast: Beating the records

By Alejandro Arrieche

Edited by Alexandra Pankratyeva

09:45, 13 April 2022

O’Reilly Automotive (ORLY) stock forecast: Beating the records a financial chart on a technological abstract background represents a financial crisis, a financial crisis
O’Reilly Automotive (ORLY) stock forecast: Beating the records Photo: whiteMocca / Shutterstock.com

O'Reilly Automotive (ORLY) stock has been testing record highs lately. Although it has gained just 4% year-to-date (as of 12 April), the five-year ORLY stock history chart showed it rose 187% and hit an all-time high of $739.35 on 11 April. 

“The main reasons for the rise in shares of auto parts retailers such as O’Reilly are the coronavirus pandemic and the acute shortage of microchips in the market. The pandemic has forced people to use the car more often instead of public transport, and the microchip shortage is forcing car owners to pay more attention to their old car than to switch to a new one. Firstly, the cost of cars due to the macroeconomic and geopolitical situation is rising, and secondly, waiting for a new car sometimes takes months,” said Mikhail Karkhalev, analyst at Capital.com.

This latest uptick happened only days before the release of the firm’s financial results covering the first quarter of the 2022 fiscal year, scheduled on 27 April. 

According to estimates compiled by Seeking Alpha, the consensus estimate for O’Reilly’s sales for this upcoming first quarter of 2022 is standing at $3.31bn (£2.55bn), resulting in a 7% year-on-year jump. Meanwhile, the consensus estimate for the firm’s quarterly adjusted earnings per share is sitting at $7.39, resulting in a 4.7% year-on-year increase.

Will the company manage to surprise the market? What could be expected from the stock of this auto parts retailer for what remains of the year and beyond? In this article, we will discuss the latest ORLY stock news along with its price action and fundamentals to outline plausible scenarios for the future.

ORLY stock analysis: Technical view

O’Reilly Automotive (ORLY) technical analysis

So far this year, ORLY stock has delivered gains of 4% to investors. However, the stock stood in losing territory until this month as higher energy prices and expected changes in macroeconomic conditions – including a tighter monetary policy in the US – led to a drop in equity valuations.

Despite the decline that the stock experienced earlier this year, the price action remains on an uptrend and the 200-day Simple Moving Average (SMA) appears to have acted as support in February during the decline prompted by the Russia-Ukraine war.

Momentum indicators have turned positive this month with the Relative Strength Index (RSI) currently standing at 61 (bullish) while the Moving Average Convergence Divergence (MACD) remains on an uptrend and above the signal line. Moreover, histogram readings have been steadily increasing and this could be interpreted as another signal that favours a bullish short-term O’Reilly automotive stock price forecast.

Moving forward, the upper bound of the price channel highlighted in the chart remains the key resistance to watch. A rejection of a move above this level may not necessarily be bad in the short term as long as the stock remains above its 200-day SMA.

O’Reilly automotive outlook: Price drivers and projections

Meanwhile, multiple macroeconomic variables should be taken into account when drafting potential scenarios for companies in the automotive sector. Some of the most relevant at the moment include inflation, supply chain bottlenecks, consumer sentiment and income, and energy prices.

For companies that sell auto parts such as O’Reilly, inflation can be a positive catalyst as long as business volumes remain relatively unchanged. This means that O’Reilly manages to sell similar quantities compared to previous periods despite an advance in the price of its products.

On the other hand, gasoline prices could also affect the demand for spare parts as users may opt to reduce their mileage by relying on public transportation, car pooling, or other less expensive ways of transporting themselves such as bikes.

Moreover, supply chain bottlenecks can affect O’Reilly’s capacity to have enough inventory to cover the demand for its thousands of stock keeping units (SKUs) and that could result in lost sales.

These and other similar factors must be taken into account when drafting an ORLY stock price prediction.

O’Reilly Automotive (ORLY) five-year performance

ORLY fundamental analysis: Latest earnings

On 9 February, O’Reilly Automotive published its financial results covering the 2021 fiscal year. 

During the 12 months ended on 31 December, the company reported total sales of $13.33bn resulting in a 14.9% year-on-year jump.

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Comparable store sales experienced a 13.3% advance compared to 2020 while gross margin increased 20 basis points to 52.7%. The company had a total of 5,784 active stores by the end of 2021, most of which are located in the United States.

GAAP operating profits for the year landed at $2.92bn, resulting in an operating margin of 21.9%. This figure was 20 basis points higher than the margin reported the previous year.

In 2021, the company reported net earnings of $2.16bn while fully diluted earnings per share ended at $31.10.

During this same year, O’Reilly produced free cash flows of $2.55bn, resulting in a 16.4% jump compared to the previous year. Meanwhile, the firm’s long-term debt stood at $3.83bn on total assets of $11.72bn including $362.11m in cash and equivalents. O’Reilly does not pay a dividend at the moment.

O’Reilly Automotive stock projections: Analyst sentiment

Commenting on the O’Reilly Automotive stock future price, Karkhalev highlighted that the company’s strong fundamentals explain its steady growth: 

“O’Reilly shares have been rising without major corrections since March 2020, showing a pronounced uptrend ahead of the broader market. However, this should hardly be seen as a good opportunity to buy in-demand shares. Any negative news about the company could instantly bring down its share price. 
“Overall, the investor stance is clear, and the rise in the stock is not without reason. The company has shown steady growth in revenue and net profit since 2015. At the end of 2021 alone, ORLY’s revenue rose 15% to $13.33bn, while net income was 23.5% higher than in 2020, reaching $2.16bn. Accordingly, if you decide to invest in O’Reilly, you should wait for at least a shallow correction.”

So, is O’Reilly Automotive stock a ‘buy’, ‘sell’, or ‘hold’? The consensus recommendation from analysts according to data compiled by MarketBeat (as of 12 April) was bullish with a total of nine out of 16 firms rating the stock as ‘buy’. Seven analysts gave it a ‘hold’ rating. No analyst has rated O’Reilly stock as a ‘sell’.

The average ORLY stock price target stood at $717.97 per share, resulting in a potential 0.82% downside risk based on the 11 April closing price of $723.94. Meanwhile, the highest 12-month estimate for O’Reilly Automotive stock future price was set at $837 and the lowest at $590 per share.

Five analysts boosted their price targets for the stock following the release of the most recent quarterly report in February including Bank of America, Jefferies Financial Group and Wedbush.

O’Reilly Automotive (ORLY) analyst ratings and price targets

O’Reilly Automotive (ORLY) stock forecast: Targets for 2022, 2025 and 2027

As of 12 April, several forecasting services provided ORLY stock price forecasts for 2022 and beyond based on algorithm-based estimates.

Wallet Investor had a bullish short-term outlook on ORLY stock, suggesting it could move up to $742.284 on 26 April. For December 2022, it expected the ORLY stock to hit $809.768. 

Moving forward, Wallet Investor’s ORLY stock forecast 2025 suggested it could close the year at $1,113.370 and move up to $1,233.610 in five years’ time. 

Gov Capital also held a bullish outlook for ORLY stock. It expected the price to rise to $755.489 and close the year at $892.013. It suggested O’Reilly Automotive stock could reach $1,330.414 by the end of 2023 and $1,912.271 by the end of 2025.

Although the service did not provide price targets for 2030, its five-year ORLY stock forecast expected it to hit $3,650.126 in April 2027.

When looking for O’Reilly Automotive (ORLY) stock forecasts, it’s important to bear in mind that analysts’ and algorithm-based projections can be wrong. Their projections are based on an analysis of the HPQ historical stock price. Past performance never guarantees future results.

It’s important to do your own research. Your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your portfolio and how comfortable you feel about losing money. You should never trade more than you can afford to lose.

FAQs

Is ORLY a good stock to buy?

In the past five years the value of O’Reilly stock has increased 187% and the stock continues testing new highs as of 12 April 2022. The company has a robust business model with stores spread all across the United States and both its profit and cash-flow generation capacity are quite strong. 

Still, whether ORLY stock is a suitable asset for your portfolio depends on your own trading objectives and the opinion based on your own research. Remember, it’s important to reach your own conclusion of the company’s prospects and likelihood of achieving analysts’ targets.

Will O’Reilly Automotive stock price go up or down?

According to the third-party forecasts from Wallet Investor and Gov Capital, as of 12 April, the price of ORLY stock could go up in both the short and long term. This is not a recommendation to invest in ORLY stock, as analysts’ projections can go wrong.

Why has the ORLY stock price been going up?

The price of O’Reilly Automotive stock has been going up in April as the price of crude oil has been retreating despite persisting geopolitical tensions in Europe. Higher crude prices tend to be considered a negative catalyst for auto parts retailers as consumed mileage usually drops when gasoline prices are high and this can reduce the demand for spare parts in the short term.

Markets in this article

ORLY
O'Reilly
1043.91 USD
15.52 +1.510%

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