Tuesday, November 07, 2006

Calls of Note Part 3

- Morgan Stanley says they are surprised by the strength of Staples (NASDAQ:SPLS) brand following a survey the firm conducted. Customer base is more loyal than its peers and less willing to shop other outlets. Demand for SPLS stores remains strong even in areas of higher concentration. These factors should continue to support square footage and overall top line growth in future years.

Office super stores likely to continue gaining share from local shops. All of the office super stores had stronger customer perceptions than the local office supply store. This suggests that super stores are likely to continue gaining share from this group.

SPLS customer is less likely to shop alternatives. Firm's survey data suggests that SPLS less willing to shop competitors than their peers. 46% of the customer base surveyed is likely to shop other super stores vs close to 60% for OMX and over 50% for ODP. Further, a greater portion of SPLS customers are expected to shop SPLS more frequently compared to OMX customers shopping OMX and ODP customers shopping ODP.

The firm now has increased confidence in their Overweight rating of SPLS given the strong brand loyalty and demand for new locations. They believe these factors should support future growth. Continue to see fair value for the stock in the $28-30 range based on a variety of valuation metrics.

Notablecalls: Is this an actionable trading call? Ofc not! But I guess it's something for the investing types.

1 comment:

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