AutoZone's (AZO) continued strategic investments are expected to position it for long-term outperformance, BofA Securities said in a report Wednesday.

BofA emphasized AutoZone's consistent performance in both the do-it-yourself and pro segments, noting continued share gains and investments in labor and infrastructure. The expansion of the company's commercial programs -- now in 92% of stores -- and rollout of hubs and mega hubs are key drivers of future growth, BofA said.

The brokerage upgraded AutoZone to buy from neutral and raised its price objective to $4,800 from $3,900, citing the auto parts retailer's recession resilience, market share gains, and favorable industry dynamics, the report said.

AutoZone is set to report Q3 results on Tuesday, with BofA projecting EPS of $38.15, above the $36.80 consensus, with domestic comparable sales growth of 2%. The firm cited stronger-than-expected data from Bloomberg Second Measure and robust March sales activity, likely boosted by favorable tax refunds, the report said.

BofA also said it sees "opportunities for a return to 2%-4% industry inflation" and believes the auto aftermarket could benefit. Strategic investments are expected to drive share gains, with the company potentially gaining "disproportionate share from [advance auto parts] store closures," the report said.

BofA estimates about one-third of AutoZone's costs are exposed to Chinese imports but expects the company to pass these costs to consumers, who are more likely to repair existing vehicles than buy new ones.

Price: 3870.35, Change: -9.80, Percent Change: -0.25