Deutsche Bank upgraded Staples (SPLS) to buy from hold.
Analyst Michael Baker says he's upgrading on three key investment themes: First, there's signs of improvements in the external business environment. Second, he sees continued initiatives driving operating margin expansion. Third, he likes Staples' attractive valuation relative to other retailers.
Baker says factors working in the company's favor include bottoming office vacancy rates, early increases in business employment, growth in industrial production, and higher gross domestic product. He upped the $1.02 fiscal 2004 (Jan.) earnings per share estimate to $1.09, in line with guidance; he raised the $1.18 fiscal 2005 estimate to $1.27. Baker also set a $28 target.