Goldman Sachs Upgrades Duane Reade

Analyst John Heinbockel says the drugstore can double its store base in New York over five years

Goldman Sachs adds Duane Reade (DRD ) to his recommended list, up from market outperform. On Friday the company posted third-quarter EPS of $0.27 compared with $0.34 3Q EPS. He sets a conservative 12 to 15-month price target of $40, up 35% from current levels.

Analyst John Heinbockel believes that the drug store chain is capable of nearly doubling its store base, without leaving metro New York during the next five years. He says that, with this expansion, sales and profit will grow by 15% and 20%, respectively. Shares should meaningfully outperform over the next 2-3 years. He notes a recent 20% pullback in the stock creates a compelling entry point. He sees fiscal 2001 EPS of $1.22 and $1.65 in 2002.

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