How To Play The Advance Auto Parts Downgrade; Is It Still Looking Better Than O'Reilly Automotive?

Advance Auto Parts Inc AAP was downgraded by RBC Capital on Friday, from Top Pick to Outperform.

Despite the downgrade, the firm still raised its price target for the stock from $163 to $177. Moreover, the stock is looking pretty good, and most analysts see some upside potential in it.

What Are Other Analysts Saying?

On Thursday, Deutsche Bank upgraded the stock from Hold to Buy, setting a $180 price target. Analysts argued that Advance Auto Parts will benefit from lower gas prices in 2015. In fact, they expect general retail to outperform the market in 2015 –helped by lower energy costs- after underperforming in 2014.

Furthermore, in late 2014, Bank of America reiterated its Buy rating, and boosted its price target from $165 to $171, while Morgan Stanley maintained an Overweight, upping its target to $170 on the back of widening margins and growing same-store sales.

Citigroup is not as bullish, as it issued a Neutral rating on January 5. However, its price target of $165 still implies some upside potential from the current stock price of $160.30.

What About O'Reilly?

O'Reilly Automotive, Inc. ORLY, a larger automotive parts and accessories retailer, does not look as appealing. In fact, the stock was also downgraded by RBC Capital on Friday, from Outperform to Sector Perform. The firm set a price target of $188, which implies almost no upside potential from the current price of $187.81.

Citigroup is somewhat more confident, and fixed its price target at $200. However, the firm maintains a Neutral rating on the stock.

The most bullish Wall Street research firm is Barclays, which reiterated an Overweight rating, accompanied by a $225 price target, in late 2014.