A group of outperforming specialty retail stocks now offer little additional upside for investors, according to Morgan Stanley. Analyst Simeon Gutman downgraded Autozone , Advance Auto Parts and O'Reilly Automotive to equal weight from overweight, saying in a note to clients on Friday that the hot streak for the stocks has gone far enough. "The stocks are at/close to our 2023-based price targets and risk/rewards are balanced, in our view," the note said. Auto parts retailers were among the stocks to bounce back quickly from the pandemic lows in 2020, and the group has outperformed again this year. Since the end of December, Autozone has climbed 34%, while O'Reilly and Advance Auto Parts have gained more than 32%. Now, the stocks are highly priced as it gets harder to show growth, Morgan Stanley said. "On the negative side, 1) the group faces difficult top line compares as it cycles favorable weather, stimulus, and 'stay at home' wallet share shifts, and 2) is no longer pricing in extreme EV fears ... as multiples have recovered ~2.5 turns since March," the note said. These calls are part of a group of "mid-cycle" downgrades for Morgan Stanley, and the firm said it believes they have limited downside. Here are the Morgan Stanley's price targets for the stocks: Autozone: Price target to $1,650 per share from $1,640, upside of 3.8% O'Reilly: Price target maintained at $630, upside of 5% Advance Auto Parts: Price target maintained at $220, upside of 5.4% -CNBC's Michael Bloom contributed to this report.
A man walks outside an AutoZone store in Albuquerque, New Mexico.
Sergio Flores | Bloomberg | Getty Images
A group of outperforming specialty retail stocks now offer little additional upside for investors, according to Morgan Stanley.