Benzinga | Jun 15, 2021 12:41PM EDT

Morgan Stanley Downgrades Fastenal Amid Record Valuation

While external factors limit the upside for Fastenal Company (NASDAQ:FAST), internal factors pose heightened risk over the next 12 months, according to Morgan Stanley.

The Fastenal Analyst: Joshua Pokrzywinski downgraded the rating for Fastenal from Equal-Weight to Underweight, while reducing the price target from $53 to $48.

The Fastenal Thesis: The downturn in the company's stock has been significantly less steep than other cyclicals and is now trading at a record high valuation, Pokrzywinski said in the downgrade note.

"We see a challenging medium-term catalyst path for FAST as cyclical transition, PPE headwinds, a lull in new customer acquisition and a strategic pivot coincide with an all-time high valuation," the analyst stated.

"The company is undergoing a strategy change and potentially has an air pocket of outgrowth given limited net Onsite customer acquisitions over the past year," he wrote.

"Over time, we believe the majority of these issues are manageable and believe the strategy is adapting to the business environment, but see potential for a tricky handoff at a point in time where valuation and comparisons are demanding," he added.

FAST Price Action: Shares of Fastenal had declined by 1.79% to $51.84 at the time of publishing Tuesday.

(Photo: Fastenal)