In a research note released Monday, Morgan Stanley analyst Simeon Gutman initiated coverage on O'Reilly Automotive (NASDAQ: ORLY) with an Overweight rating and a $175 price target.
The analyst believes that the company's risk/reward ratio is favorable as the company continues to beat earnings per share estimates.
Gutman stated, "Longer term, we believe the ingredients are in place for ORLY to achieve 20% EBIT margins by 2018 (versus 17.6% in 2014)."
The analyst continued by saying that there is major growth opportunities and O'Reilly offers the strongest square footage growth in auto parts retail at a growth rate of four to five percent. The analyst also expects O'Reilly to continue to lead the industry at a growth comp of at least four percent.
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