Shares of Valvoline Inc. sank 4.2% in premarket trade Friday, after J.P. Morgan turned bearish on the engine maintenance products company, citing concerns over competition from Amazon.com Inc., which recently launched a private-label motor oil. Analyst Jeffrey Zekauskas cut his rating back to underweight, after raising it to neutral on May 4. He cut his stock price target to $20, which is 10% below Thursday’s closing price, from $22. Zekauskas said that while the AmazonBasics Full Synthetic Motor Oil was first available in July, the reviews are starting to come in, and are favorable. He noted that Amazon is selling a one-quarter synthetic oil six pack for the equivalent of $3.56 per quarter, while the comparable Valvoline product is priced at the equivalent of $9.49 per quart. “We think that the shorter-term effect of the new business competitor will be some reduction in the Valvoline trading multiple because the lubricant industry structure is probably weaker for its entry,” Zekauskas wrote in a note to clients. Valvoline’s stock has gained 6.8% over the past three months, while Amazon shares have run up 15% and the S&P 500 has tacked on 4.4%.
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