Why Big Lots Inc. Is Ready to Rebound

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Big Lots  (NYSE: BIG  ) gained 3% this morning after Deutsche Bank upgraded the closeout retailer from hold to buy.

So what: Along with the upgrade, analyst Paul Trussell raised his price target to $33 (from $32), representing about 25% worth of upside to Friday's close. While momentum traders might be turned off by the stock's sharp plunge in recent months, Trussell thinks Big Lots might now be too cheap to pass up given its improving assortment of goods and various financing/payment options.

Now what: According to Deutsche, Big Lots' risk/reward trade-off is pretty attractive at this point. "While we acknowledge an increasingly competitive environment and headwinds faced by consumers, BIG has the lowest sales productivity in our universe and we believe an edited, yet improved assortment that includes coolers, access to EBT, furniture financing, and the development of an omni-channel presence should help BIG return to at least its historical earnings power of ~$3.00," noted Trussell. So while Big Lots' competitive position remains far too frail for conservative Fools, its near-term turnaround potential might be attractive to more enterprising contrarians. 

More compelling ways to play retail
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2842654, ~/Articles/ArticleHandler.aspx, 7/30/2014 3:57:58 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement