RBC: Time to Sell Surging Casey's General Stores

The brokerage firm boosted its CASY price target, though

RBC downgraded Casey's General Stores Inc (NASDAQ:CASY) stock to "underperform" from "sector perform," with the analyst in coverage expressing concern over valuation, and saying the Iowa-based convenience store chain is facing headwinds from the farm economy and increasing competition. Following CASY stock's long-term climb up the charts, though, the brokerage firm raised its price target to $158 from $144 -- still a stiff discount to last night's close at $170.56.

Casey's General Stores shares dipped out of the gate, but were last seen up 0.3% at $171.02. The stock has surged more than 33% since a late-May bounce off its 200-day moving average, and topped out at a record high of $173.31 on Aug. 20. The equity has consolidated some of these gains, but appears to have found a foothold near $168 -- home to its previous highs.

In spite of this impressive price action, most analysts echo RBC's skepticism, with six of nine brokerages maintaining a "hold" or worse recommendation. Plus, the average 12-month price target of $159.10 represents expected downside of 7% to CASY stock's current perch.

The pessimism is seen elsewhere, too, with short interest up 35% in the two most recent reporting periods. Casey's General Stores stock's ability to rally in the face of such intense selling pressure speaks to its underlying strength. Plus, it would take shorts more than four days to buy back their bearish bets, at the average pace of trading, pointing to sideline cash available to keep the wind at CASY's back.

Another positive earnings reaction could shake some of the weaker bearish hands loose. Casey's General Stores' quarterly results are due out after the market closes on Monday, Sept. 9, and the stock has closed higher after earnings in seven of the last eight quarters.