Investing.com -- Stifel upgraded Valvoline to Buy from Hold, citing a recent share pullback and arguing that concerns around rising oil costs and gasoline prices are largely priced in.

Shares of Valvoline were up 5% in Monday trading. It has lost 4% value in last one year.

The brokerage set a $42 price target and said Valvoline’s business model should limit the impact of higher base oil costs, noting finished lubricants account for only about 12% of revenue. It added that the company’s pricing power and a 19-year streak of same-store sales growth should help offset margin pressure.

Stifel said Valvoline could pass through higher input costs with relatively modest price increases. A $1 per gallon rise in base oil prices would require about a $0.50 increase to customers to maintain margins, it said, supported by low price sensitivity given the infrequent nature of oil changes.

The firm also pointed to structural offsets, including variable pricing across its franchised network and rising waste-oil recovery revenue, which tends to track crude prices.

Beyond costs, Stifel sees a long runway for unit expansion. Valvoline operates about 2,380 locations and could grow to roughly 4,000 units over the next decade in a fragmented market. Lower-cost modular store formats and build-to-suit strategies are expected to reduce capital needs and speed up new store ramp-up.

The brokerage said a planned national advertising fund launch in fiscal 2027 should further support new-unit returns by accelerating customer adoption.

Near term, Stifel expects a rebound in demand following weather-related disruptions, with data pointing to a recovery in traffic that could support second-quarter same-store sales at or above market expectations of about 5.3%.

It added that demand for oil changes has historically remained resilient even during periods of higher fuel prices, with only modest declines in miles driven in most scenarios. Pricing gains are expected to offset any limited volume pressure.