Bapcor Ltd (ASX: BAP) shares are trading in the red again in Tuesday lunchtime trade. At the time of writing, the share price has slumped 4.41% for the day to $2.495 a piece, which means over the past 2 days it has fallen over 21%. For the year, the shares are 49.6% lower.
The investor sell-off follows the company's significant earnings downgrade yesterday. The automotive spare parts and accessories business said it expects net profits after tax (NPAT) for the full financial year, not including one-off significant items, to be around $51 million to $61 million. This is around 32% lower than market expectations.
Now, in a note to investors, Macquarie Group Ltd (ASX: MQG) has said the company has a bumpy road ahead.
Are Bapcor shares a buy, hold, or sell?
The broker confirmed its neutral rating on Bapcor shares. But it also lowered its target price to $2.90, down from $3.85 in August this year. At the time of writing, this still represents a potential 16.2% upside for investors over the next 12 months.
"Our TP lowers -25% to $2.90ps which is set near the midpoint of our $2.56-3.30 valuation range, based on 10-12x FY26e EV/EBITDA (unchanged multiples and midpoint of val range). While this valuation captures the earnings headwinds in FY26e, given the recent earnings downgrades earnings visibility is currently low and delivering the stronger 2H26e will be important to drive a re-rate in the share price," Macquarie analysts told investors.
"Neutral. Mgmt remain focused on executing strategic initiatives causing disruption across the group, but early signs of improvement in Networks provide some confidence in the turnaround (1Q26 earnings grew, retaining cost out, regaining customers)."
The broker also noted that delivering on FY26 guidance is critical for Bapcor to receive a re-rate.
What did Macquarie have to say about Bapcor's guidance update?
The NPAT guidance level of $51 million to $61 million is over 30% lower than Macquarie and market consensus.
"Underlying NPAT guidance for 1H26/FY26 is $14-18m and $51-61m, implying 2H26 NPAT $47-43m. BAP expects the stronger 2H will be driven by a focus on driving sales growth, benefits of pricing realignment measures, realisation of savings initiatives, and no further one-offs," the broker said in its investor note.
It added that Bapcor says that NPAT and cash flow forecasts show it will remain within covenants. Bapcor has undrawn facilities of $332m.
Macquarie also revised its earnings estimates on Bapcor shares following the announcement. Earnings per share for FY26, FY27, and FY28 are expected to be -25%, -8%, and -9% to reflect the update. The forecast also expects a stronger 2H FY26 run-rate to continue into FY27 and FY28.
