UPDATE: Bank of America Downgrades Lithia Motors to Neutral, Raises PT Following Solid 2Q13 Results

In a report published Monday, Bank of America analyst John Murphy downgraded the rating on

from Buy to Neutral, but raised the price target from $66.00 to $70.00. In the report, Bank of America noted, “2Q13 was once again a solid quarter for the public auto dealers, and Lithia in particular, and we are seeing signs of improving growth in the Parts & Service segment which should be a tailwind for the next several years. Hence, we are raising our 2014e EPS from $4.40 to $4.65 and 2015 from $4.85 to $5.15. As a result of our higher estimates, we are raising our price target on LAD from $66 to $70, which is still based on a P/E of 15x our 2014 estimate. Although we are raising our estimates and price target, the stock's almost 80% year-to-date appreciation appears to be pricing in our optimistic growth assumptions. At ~$68, LAD is currently trading at a P/E of about 14.6x on our revised 2014 estimate and is trading at a premium to its peer group. Therefore we are downgrading the stock from Buy to Neutral based on valuation. Although we remain optimistic about the near and long-term growth potential of the dealer business model, we see relatively more upside potential in some of the other stocks in our coverage universe.” Lithia Motors closed on Friday at $68.05.