Investing.com -- JPMorgan upgraded Valvoline to “Neutral” from “Underweight,” saying the stock’s recent pullback has brought its valuation closer to historical averages even as the company faces mounting raw material cost pressures.

The brokerage maintained its $35 price target on the automotive services company, noting that shares now trade at roughly 11 times projected fiscal 2026 EBITDA, down from about 12.4 times when JPMorgan downgraded the stock in February.

Analyst Jeffrey Zekauskas said Valvoline’s volume growth has slowed as its store network matures, limiting the potential for further valuation expansion. However, the recent decline in the share price improved the risk-reward profile enough to justify a more neutral stance.

JPMorgan also raised its 2026 EBITDA estimate to $550 million from $535 million after stronger-than-expected quarterly results. The firm highlighted stronger pricing trends, with Valvoline delivering nearly 6.8% price and mix growth during the March quarter.

Still, the bank warned that rising base oil prices could pressure margins in coming quarters. JPMorgan estimates base oil costs may increase by $1 to $1.50 per gallon in the third quarter of fiscal 2026 compared with the prior quarter, driven partly by tighter global supply following disruptions around the Strait of Hormuz.

Valvoline has been raising prices to offset higher lubricant costs, but JPMorgan cautioned there could be a lag before the increases fully compensate for inflationary pressures, creating near-term earnings risk.

The brokerage also pointed to the company’s aggressive expansion strategy, including its $607 million acquisition of 162 Breeze Autocare stores, as both a growth driver and a source of financial strain. JPMorgan said the deal was completed at a relatively high valuation multiple and would increase leverage and interest expense in fiscal 2026.