UBS Downgrades Staples, Inc. (SPLS) to Neutral

UBS downgraded Staples, Inc. (NASDAQ: SPLS) from Buy to Neutral with a price target of $10.50 (from $14.00) after the merger was terminated.

Analyst Michael Lasser commented, "Without the value creation potential from a merger with ODP, SPLS' investment case rests on a strategy that it hopes will help it confront the intense currents afflicting the office supply sector. The company has done an admirable job of diversifying its business over the past few years. Categories outside of core office supplies now account for around 50% of its sales. But, we don't think this is enough to drive sustainable growth for the foreseeable future. It just hasn't reached an equilibrium point where its sales associated with categories that are growing more than offset the categories that are in decline. Thus, we think the most likely case is that its earnings will remain stagnant and the market won't assign a very high multiple for its cash flow stream. This will keep the upside case for the shares capped for some time to come, in our view."

For an analyst ratings summary and ratings history on Staples, Inc. click here. For more ratings news on Staples, Inc. click here.

Shares of Staples, Inc. closed at $10.36 yesterday.

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