Shemesh joins Evercore ISI's Melich in using the pullback in an auto parts seller to issue an upgrade on the stock.
The drivers of Shemesh's upgrade jibe with Melich's.
"We estimate that about 50% of O'Reilly's cost of goods sold is sourced internationally, which is likely to result in incremental cost of about 9%. That being said, we estimate that about 85% of ORLY products fall in the required maintenance/parts bucket, which provides the company pricing power. We note that ORLY is lapping over a reinvestment year and should benefit from new car inflation keeping consumers in current vehicles longer," Shemesh explained.
"Our $1,503 price target is based on 30x (~29x prior) our 2026 EPS estimate of $50.11 (about 1% ahead of consensus estimates for $50.11). Our implied multiple represents peak multiple for the name, which we think is justified given relative attractiveness. While our revised price target represents limited absolute upside, the name should be a relative out-performer," he added.
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>>> Evercore ISI analyst Greg Melich
Pick: Genuine Parts Company (GPC)
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"Auto parts stand out at the top of the list as being relatively well positioned to pass through higher input costs brought about from tariffs," Melich wrote in a note on Friday. Melich upgraded his rating on auto parts play Genuine Parts Company to Outperform from In-Line.
Explained Melich, "We view GPC as one of the better insulated companies in our coverage from a tariff perspective, with the ability to pass through rising prices in both its auto and industrial segments, there is even a possibility that earnings may move higher from tariffs. While we are currently below the Street, with the stock trading at about 14x depressed 2026 EPS and end markets largely depressed, we believe that much of the risk associated with a choppy low-income consumer and tariffs is baked in."
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