Staples, Inc. (NASDAQ:SPLS)

CAPS Rating: 2 out of 5

An office products company which through its subsidiaries, operate three business segments: North American Retail, North American Delivery, and International Operations.


Player Avatar TSIF (99.96) Submitted: 5/18/2011 3:36:21 PM : Outperform Start Price: $15.89 SPLS Score: -34.65

It's really hard (and dangerous), to call a bottom on a well known equity that has taken a 16% one day drop. Usually it can take 2-3 days for things to settle in and I would most likely do best waiting for the settling, but in this case I'm willing to take a call on Staples, Inc. Staples did the cardinel sin, missing estimates AND guiding down. Overall, however, the current estimates give Staples a decent P/E of around 10 and margins/sales are holding overall. Deep discounting some items to gain traffic is risky in this climate and apparently didn't work out as expected. Office supplies have been difficult to maintain margin on with continuous competition from just about everyone who has space on thier shelves. Higher fuel costs decreases the margins. Sub $17 is a two year low and was only breifly seen twice in the last five years on the two markt panics. While growth may be limited Staples still plans on opening up to 20 new stores and they will continue to grow. I'm willing to try an entry here at this selloff/entry point.

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Member Avatar BuffettJunior1 (97.69) Submitted: 5/18/2011 6:06:48 PM
Recs: 2

Based on a pure fundamental analysis this stock looks great. However, this is not a stock for the long term. There is nothing at this store that you cant get much cheaper at Walmart or online. In my opinion this company's growth has peaked and for that reason I wouldn't invest in it.

An almost 16% drop because the company missed earning estimates is pretty ridiculous and I'm sure that you will make a nice short term gain.

Member Avatar TSIF (99.96) Submitted: 5/18/2011 6:15:55 PM
Recs: 3

Thanks for the feedback. You made a great call before earnings!!! ;)

Fundamentally, Staples has a "few things" going for it. One is that when compared to Walmart MANY shoppers, for better or worse will NOT shop at Walmart. While many low income shoppers will certainly buy electronics at Walmart, (I sent my brother-in-law there last night), there are also many shoppers who will not enter a Walmart store for any reason or any savings.

Another point in Staples favor is it's dividend and it's loyal institutional following that will help keep a floor on it.

Finally, I find that when a profitable equity takes a 16% beating on forward guidance that it's somewhat protected against further sharp declines in the very short run. I like the technicals at this level. I still expect more market correction and it has already "given it's pint of blood".

I'm not too thrilled about the laptops and electronics FLYING to the store, crossing streams, and crossing the road dragging their little mouse tails! That might be a bigger problem with shoppers!!! ;)

Good points, take care. Best of luck on your down call, (after I net some decent points on my upcall!). ;)

Member Avatar JeramyUtara (96.81) Submitted: 5/25/2011 9:45:33 AM
Recs: 0

Thank you both for this excellent thread of pitches. I agree with TSIF in the idea that the short term upside potential outweighs the downside potential.


Member Avatar TSIF (99.96) Submitted: 5/25/2011 7:41:06 PM
Recs: 1

Nice average pick score Jeramy....shows the power of buy/hold if you get a good entry point.

BuffettJunior1, and also no points for your downthumb until after JeramyUtara gets his usual 50+ or so! ;)

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