Shares of discount retailer Big Lots Inc. popped in midday trading Wednesday after an analyst upgraded the stock, citing its cheapness and recovering same-store sales.
JPMorgan analyst Charles Grom lifted the stock to "Overweight" from "Neutral" and raised his 12-month price target by $6 to $23. That price target implies upside of nearly 24 percent from its closing price Tuesday of $18.58.
The Columbus, Ohio-based discounter's value buys make it a good recession pick, while its lack of debt, free cash flow and "achievable" guidance mean the stock is poised to gain, he said. The stock has lost 47.4 percent since hitting its 12-month peak of $35.33.
Grom raised his 2009 earnings-per-share estimate to $1.85 from $1.78.
Last week, the company said it expected income from continuing operations for the year to be between $1.75 and $1.90 per share. It also forecast 2009 same-store sales — a key measure of retailer performance — from flat to negative 2 percent, but Grom said he sees upside potential as sales have stabilized in the first quarter.
Sales of non-staple consumer items, such as furniture and home items, look better than they did last year, he said.
The company defines same-store sales as sales at stores open at least two years at the beginning of the fiscal year.
Shares of Big Lots gained $1.03, or 5.4 percent, to $19.59 at midday, outpacing broader markets. The stock has traded between $12.62 and $35.33 in the past 52 weeks.
