UBS Paine Webber Upgrades Factory 2-U

Analyst Richard Jaffe raised the rating based on better sales trends and a stronger belief in the discount retailer's business

UBS Paine Webber upgraded Factory 2-U Stores (FTUS ) to strong buy from buy.

Analyst Richard Jaffe says the upgrade is based on an improved sales trend and his renewed conviction in the viability of the business for the near and long term. He notes recent weather seasonable and comps have turned positive. He expects the company to benefit from management's initiatives for advertising and merchandising.

Jaffe remains convinced in the long-term viability of the company. He sees $1.67 fiscal 2002 (Jan.) EPS, and $2.06 for fiscal 2003. Over the next 12-months, he believes shares can likely trade near the market multiple, at 19-20 times his fiscal 2003 EPS estimate, yielding a target price of $40.