Auto parts chain AutoZone Inc. (AZO) is a company with the right business model, at the right time.

And one does not have to hold an MBA from Harvard to understand why. Until monthly U.S. job growth averages about 200,000, new car auto sales will not stretch to the stratosphere.  New vehicle sales are trending at decent annual pace -- at a 13.6-million-vehicle per year pace as of November 2011, but understand that if this was a normal economic recovery, car sales would be zooming higher.

They're not, and AutoZone is benefiting from the above under-purchase trend also called kick-down in the auto sales field: adults unable to buy a new car are maintaining their existing used cars; others are purchasing a used car instead of a new one. Each trend is bullish for AZO.

Look for, AutoZone to record fiscal 2012 revenue growth of 8-10 percent, boosted by both same store sales growth and about 200 new stores. Margins should widen. Further, revenue should advance 7-9 percent in fiscal 2013.

The Thomson Reuters First Call FY2012/FY2013 EPS estimates for AZO are $23.01 to $26.55. Each EPS estimate looks about 10% low, according to my analysis.

Technical Statistics: Technically, AutoZone's chart looks great: a staircase, and one that's held its own, despite the slower growth the U.S. economy registered in mid-2011. AutoZone did correct from about $300 to $270 in the summer, but AZO has since resumed its uptrend, as noted, making a new high above $343 before pulling-back slightly. AutoZone's ability to stay above the key, 50-day moving average -- with basically only a summer violation -- is a sign that institutional investors continue to add to positions. AutoZone appears headed toward $370 by mid-2012, and toward $400 by the end of next year.

Stock Category: AutoZone, a 4,389-store auto chain, is ideal for investors who want a growth company with plenty of upside potential. There's only a 10 percent chance you'll lose your entire investment with AZO over a 10-year period. There is no dividend.

2012 Outlook: I view AutoZone  as a long-term play, but if you're looking to sell AZO within the year, it's probably best to take your profits after it rises to $365-369, if it fails to rise above $370.

Stock Analysis: AutoZone Inc. is a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 50% position in AZO now, and another 25 percent in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my AZO position before March 2012 and I'd put a sell/stop loss at: $220.


Disclosure: L.C. Jacobs of New York, N.Y. reviews stocks on a quarterly, semi-annual, and annual basis.

L.C. Jacobs has no positions in stocks reviewed, but does own federal, municipal, and corporate bonds.

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