Stephens Upgrades Party City to 'Overweight'

Analyst Dennis Telzrow says the party-supply retailer is showing clearer earnings visibility

Stephens upgraded Party City (PCTY ) to overweight.

On Tuesday the company posted an 11-cent third-quarter loss. Analyst Dennis Telzrow says the third quarter was line with expectations. He attributed the upgrade to a resolution of poor visibility, a problem that had deterred investors in the past. He notes the new CEO presented well on a conference call, compared to prior cases of limited communication with investors.

Telzrow says the outlook for performance of new stores and system integration with JDA Software is now more clear. He notes the limited downside risk in the stock price. Telzrow trimmed the 87 cents fiscal 2003 (Jun.) earnings per share estimate to 84 cents, to account for workers' compensation charges. He also sees $1.08 in fiscal 2004 earnings per share. He has a $12 target.

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