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UPDATE - UBS Initiates Coverage on Office Depot (ODP) with a Sell; Full Supply of Challenges

June 16, 2011 11:56 AM EDT
Get Alerts ODP Hot Sheet
Price: $53.05 +1.22%

Rating Summary:
    4 Buy, 11 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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UPDATE - UBS initiates coverage on Office Depot (NYSE: ODP) with a Sell rating. PT $3.

UBS analyst says, "We think the stock will hover around its recent trading range for an extended period, making the risk/reward look unattractive. Even if the office supply market recovers, ODP will likely be weighed down by a few company-specific factors, including the stigma from investigations into its pricing practices and the uncertain outlook for its Business Process Improvement program."

"We think industry consolidation is inching closer - We think the most likely case is that Office Depot (NYSE: ODP) and Office Max (NYSE: OMX) would partner up in an equity swap. Our reasoning is that the longer industry challenges drag on, the risk of inaction becomes greater than the risk of action for both companies. While integration would be messy, the industry would benefit from the resulting capacity reduction."


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