Bank of America Resumes O’Reilly Automotive Coverage at Buy, Cites Professional Sales
O’Reilly Automotive, Inc. (NASDAQ:ORLY) stock received a Buy endorsement from Bank of America on Monday, as the brokerage reinstated coverage on the automotive aftermarket specialty retailer.
Bank of America analyst Christopher Nardone reinstated coverage with a Buy rating and a $106 price target, implying approximately 17.9% upside from the reference share price of $89.92.
Nardone cited the company’s strong execution, resilient comparable store sales growth, favorable revenue mix and sophisticated distribution network as strong points for its premium valuation among peers.
The company’s next catalyst is its third-quarter earnings report on Oct. 28.
Professional Business and Supply Chain Drive Competitive Advantage
Bank of America highlighted O’Reilly’s commercial business as a significant growth driver.
Professional customer sales reached $8.6 billion in 2025 and represented 50.5% of total revenue in the second quarter, a 12.5% increase year over year and marking the fourth consecutive quarter of double-digit comparable sales growth.
Nardone estimates O’Reilly holds less than 10% of the professional automotive aftermarket, suggesting substantial runway for further commercial penetration and share gains.
Bank of America expects industry dynamics to favor the professional market as parts and repair requirements grow more complex and DIY appetite declines.
The firm highlighted the company’s smaller DIY revenue mix as advantageous, since it is more prone to the risk of inflation and higher gasoline prices, which can potentially pressure consumer spending in the long term.
Nardone cited the company’s distribution infrastructure with over 32 regional distribution centers and over 400 hub stores as a key competitive advantage.
Store Expansion and Cost Controls to Support Earnings Growth
The company targets 225 to 235 net new stores in 2026, compared with 207 in 2025.
Bank of America expects selling, general and administrative expenses to remain elevated; however, it anticipates expense growth per store to moderate, with growth slowing to approximately 3% in the second half of 2026 from 5% in the first half.
Nardone noted that O’Reilly remains focused on smaller tuck-in acquisitions in expansion markets, with no plans to pursue a large-scale, transformative acquisition in the near to medium term.
Strong Growth Outlook Supports Premium Valuation
Bank of America expects O’Reilly to deliver 4% to 5% comparable store sales growth through 2028, supported by market share gains, demand from professional businesses and potentially higher auto parts inflation.
O’Reilly expects comparable store sales growth of 4% to 6% while forecasting same-SKU inflation to moderate from 5.5% to 1% to 2% in second half of 2026.
Bank of America believes projections could prove conservative as industry expectations for same-SKU inflation increase.
Advance Auto Parts Inc. (NYSE:AAP) and AutoZone, Inc. (NYSE:AZO) recently increased their expectations for same-SKU inflation by roughly 100 basis points.
The company has continued to generate strong free cash flow despite doubling its capital expenditure since fiscal 2022 as it invests in its distribution network and store growth.
Management expects fiscal 2026 free cash flow of $1.8 billion to $2.1 billion, with capital expenditures of $1.3 billion to $1.4 billion.
Bank of America expects the company to continue taking share in a highly fragmented market and enter a sustained positive earnings-per-share revision cycle.
Nardone forecasts earnings per share of $3.27 in 2026 (up 10.1%), $3.64 in 2027 (up 11.3%) and $4.05 in 2028 (up 11.3%), representing double-digit annual growth.
The $106 price forecast is based on 29 times estimated 2027 earnings, a premium to consumer companies with similar growth.
ORLY Stock Price Activity: O’Reilly Automotive shares are trading higher by 0.68% at $90.53 at the time of publication on Monday, according to Benzinga Pro data.
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