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BofA Securities has downgraded Advance Auto Parts (NYSE:AAP) to neutral from buy citing the company's recent Q3 results and medium-term challenges.
The firm lowered its price target to $43 from $60 (~23% upside based on Wednesday's close).
Shares are down ~8% in Thursday morning trading.
Although Advance Auto Parts (AAP) has announced a cost cutting initiative as well as the sale of some assets, analyst Elizabeth Suzuki said that the company's "transformation is going to be messy and free cash flow will likely remain under pressure for at least the next twelve months."
She added that the company's US retail operations have consistently underperformed larger peers based on per-store metrics.
Suzuki wrote that Advance Auto Parts (AAP) is unlikely to be acquired given the investment needed to improve its supply chain and potential regulatory headaches.
"Thus we expect peers to continue to grab market share from AAP organically rather than acquire part of or all of the company outright," she said.