Citigroup raised its investment recommendation on Hot Topic (HOTT) to buy from sell on Wednesday, citing potential catalysts that could boost the specialty retailer's stock price.
Analyst Kimberly Greenberger said that Hot Topic's prices were trading at a 52-week low and declined 19% year to date, or 8% in the last 12 months. She sees those prices moving upward, thanks to possible catalysts including marginal improvement in comparable stocks, new licensed products, and a more focused assortment of products for Halloween, among other things. She raised her $15 price target to $19 and believes the risk/reward tradeoff is compelling at 15 times her fiscal year 2006 (ending January) estimate of 63 cent in earnings per share. She also sees 93 cents in earnings per share for fiscal year 2007 and $1.20 for fiscal year 2008.