Shares in U.S. Auto Parts Network Inc. plunged more than 30 percent early Friday after it reported a big dip in profits.

U.S. Auto Parts reported a fourth quarter loss of $5.5 million (-18 cents per share) compared to a loss of $22,000 (0 cents) from the same period a year earlier. However, the company said the recent quarter included a securities litigation settlement cost of $3.9 million.

Sales for the Carson-based company for the quarter ended Dec. 31 were $37.3 million, an increase of 1.4 percent from the same period a year earlier.

For the year, the company reported a loss of $3.6 million (-13 cents per share) compared to a profit of $3.5 million (24 cents per share) from 2006. Sales for the full year were up 34 percent to $161 million.

For 2008, U.S. Auto said first-quarter sales will likely fall in the range of $38 million to $40 million. Analysts expect sales of $48.7 million.

Piper Jaffray analyst Aaron M. Kessler downgraded the company to “Neutral” from “Buy” and slashed his price target to $5 from $11. The downgrade was due in part to the belief that conversion rates will not likely improve in 2008, he said in a client note.

Shares in U.S. Auto Parts Network dropped more than 32 percent to $3.14 in early trading Friday on the Nasdaq.