Staples Inc. (SPLS) 10 3/16: Donaldson,
Lufkin, Jenrette downgrades office supplies retailer from
"buy" to "market perform"; DLJ is
three office supplies giants (OMX, ODP, SPLS) as the
sector is overcapitalized in their opinion and SPLS is
likely to be
impacted by market conditions and
competition; slowdown is expected to be short-term only....
on this downgrade from DLJ. I have traded ODP and
especially SPLS for years. The fall (back-to-school) and
winter are always the best in terms of sales. I don't
think anyone who loads up at these prices will be
disappointed in 6-9 months. Just wish I had some $$, cause I
loaded up on ODP at $21 in the last month.
three-ODP, SPLS and OMX seem to be bargains at these
Now we know why yesterday the stock dropped while
at the same time institutional activity was not a
factor until later in the day. DLJ most likely gave an
inner circle a heads up and the selling started. THIS
IS AN SEC VIOLATION. Yesterday, THERE WAS NO REASON
FOR SELLING. This is BS. STAPLES took a huge hit at
open this morning.
This morning, the ODP money
maker has the spread on attempting to keep the price
up. Institutions are showing buying interest yet, no
one has jumped in to buy just yet. We are down bad
this morning and my shifted stop kicked in at 16 5/8.
I'm temporarily out...
Tell Sarah I said
that's why you don't buy on dips. We had another one on
the next day.
ODP is a great company, BUT there is a limit to
expansion of the store concept (at least in the U.S.). My
guess is that can only expand at the current rate for
another 3 to 4 years. Also, as the store base matures,
same store sales increases will flatten out as they
have begun to slightly above the inflation rate. Also,
the economy is in boom mode.
Put it all
together, what have you got? Maybe 15% growth for about
four years and then question marks. This growth rate
takes them to an EPS of around $1.75 in 4 years and a
reasonable multiple at that time might be 15. So four year
1.75 x 15 = $26.25. Guess what -- 23.50 /
(1.10^4) = $17.92.
Hence, an $18 per share value
looks pretty reasonable for this stock if a fair return
is 10% per year. Current stock price is $16.50 or
so. If you want a little "margin of safety" and don't
like buying into negative price momentum, you might
sit back and buy in if the stock sinks below $15. If
I held the stock, however, I would hold on.
One man's opinion! Good luck all.
turn in the barrel. My $14-15 base could be high
if others besides DLJ and Merrill dump on this
group. Great long term buying opportunity coming
up....be liquid enough to take advantage. Good investing