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What: Shares of retailer Conn's (NASDAQ:CONN) had jumped by about 10% by 1 p.m. Monday after an analyst at Stifel Nicolaus upgraded the stock, rating it a buy and attaching a $33 price target.
So what: This upgrade comes on the heels of Conn's reporting positive results for January. Same-store sales jumped 4.9% during the month after declining during December, and the 60-plus day delinquency rate for Conn's credit portfolio held steady at 9.7%. The Stifel analyst pointed to a large amount of short interest and a stabilization of the credit business as the reasons for the upgrade.
Now what: Long-term investors shouldn't put much faith in the opinion of analysts, but Conn's does appear to be turning things around, at least based on the numbers that it reported for January. However, delinquency rates are higher compared to a year ago. In January of 2014, the 60-plus day delinquency rate was 8.8%, and it was just 7.1% in January of 2013.
This apparent stabilization in the credit business may not ultimately hold. The delinquency rate has been volatile month-to-month, and two consecutive months without a rise is something that has occurred numerous times in the past two years. In each case, delinquency rates continued to increase, and it's not obvious that this time will be any different.
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