According to JPMorgan, it’s time to sell AutoNation as consumer demand for vehicles begins to decline. Analyst Rajat Gupta downgraded AutoNation from neutral to underweight, saying the auto retailer’s stock is starting to look overvalued after a solid performance during the pandemic. “Execution during the pandemic was robust and management took advantage of the surplus [free cash flow] reduce float by ~48% since the start of the pandemic and leverage is still well under control at < 2.0x,” Gupta wrote in a note on Tuesday. rise, buybacks are likely to take a step back and the transition to more M&A and associated execution credibility will take time. The stock trades at a ~5% premium to EV/EBITDA, so the risk-reward is less attractive at current levels," Gupta added. AutoNation stock outperformed at the start of the Covid pandemic. The auto dealer's stock has jumped more than 40% in 2020, and are up more than 60% in 2021. Even in 2022, AutoNation's 8% decline was still better than the S&P 500's 19% decline. Strong consumer demand for vehicles amid low inventories boosted auto dealer stocks Friday after a strong fourth quarterly results, shares of AutoNation jumped to an all-time high and had their best day in about three years. CEO Mike Manley attributed the results to operational execution as well as historically high profits. Even so, the analyst expects the industry as a whole could begin to pull back as consumers deal with higher inflation and interest rates. The analyst's December 2023 price target for AutoNation of $130 suggests the stock could fall 17% from Friday's close of $157.30. G. AN 1D m ountain AutoNation shares 1-day “Following continued strength in 2023 in the franchised auto dealer sector, the S&P 500 outperformed by 2,800 bps YTD (3,400 bps over the last 12 months), the XRT by 1,600 bps (3,700 bps) and the 12 months benefited peer KMX by 1,400 bps (5,900 bps last 12 months), we believe the sector is likely to take a breather in the near term,” Gupta wrote. “While 4Q22 consumer data points and prints have been a relief since the start of the year, contributing to the sector's recent outperformance, we don't think the seasonally less relevant January/February are great months to draw a major trend, with March/April likely to see a reversal given the ongoing price/availability pressures,” he added. —CNBC's Michael Bloom contributed to this report.