O'Reilly Automotive Named Top Sector Pick, Analyst Sees Strong 2025 Performance

O'Reilly Automotive (NASDAQ:ORLY) remains TD Cowen’s top stock pick in the sector, with analysts reaffirming a Buy rating and a $1,400 price target. Despite expectations of a sluggish year for the industry, O'Reilly's combination of offensive and defensive strengths positions it for market-leading comparable sales growth in 2025, particularly driven by a stronger "Do-It-For-Me" (DIFM) business.

TD Cowen anticipates a fourth-quarter beat on both comparable sales and earnings per share (EPS) and believes management could guide for 2025 comparable sales growth of 2-4%. This would be a cautious outlook given the mixed consumer environment, but the analysts suggest O’Reilly could raise its guidance later in the year if conditions improve. Alternatively, the company may issue a more historically typical range of 3-5% growth from the start.

Valuation remains attractive, supported by ORLY’s best-in-class execution and a scarcity premium. However, the analysts acknowledge that O’Reilly’s price-to-earnings premium over competitor AutoZone has now stretched beyond historical norms, exceeding two standard deviations above past trends.

Despite this, ORLY continues to stand out as a high-quality stock in the auto parts retail sector, offering both resilience in a challenging economic climate and upside potential from its operational excellence. Investors looking for stability and growth may find O’Reilly a compelling choice in 2025.