JP Morgan upgraded its investment rating on shares of Duane Reade (DRD ) to overweight from neutral.
Analyst Stephen Chick says the company's EPS woes and preannouncements heightened its risk profile. Nonetheless, he believes the stock's current valuation already compensates for risks. Chick notes his $1.30 (reduced from $1.35) 2003 EPS estimate is slightly below $1.40-$1.50 guidance; even so, the stock still appears attractive on his lowered estimate, while he believes there is limited downside to his forecasts, absent further erosion of the New York City economy. Chick estimates the fair value of Duane Reade at $16 per share, while upside to $19-$20 is possible should the environment show signs of stabilization.