Westlake (WLK) shares are now fully valued, with the upside capped by challenges in its Performance and Essential Materials business, BofA Securities said in a note Monday.

"PEM earnings outlook deteriorates, valuation now full," the report said.

The note said the stock is reflecting persistent challenges in the PEM business against solid Housing and Infrastructure Products profitability of the petrochemicals company.

"As we lower PEM earnings once again we project limited FCF generation, constraining WLK's ability to deploy capital," it said, adding that any major M&A would require significant re-levering.

BofA downgraded the stock to neutral from buy while raising its price objective to $87 from $86.

Price: 77.37, Change: -0.36, Percent Change: -0.46