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Don’t Underestimate Office Depot

ODP's fundamental and technical strength should continue to impress


Office Depot (ODP) — On Monday, S&P raised its 12-month target on the office supply retailer to $8 from $6, and increased its 2014 earnings per share projection to $0.15 from $0.04. S&P said it sees “increased potential benefits being realized from its merger with OfficeMax, particularly in 2016 and beyond.”

Our own Serge Berger recommended ODP on May 12, following its better-than-expected first-quarter results and an announcement of plans to close 400 stores. He said, “This gave ODP stock a technically strong boost that puts it into a positive posture in the medium term.”

ODP broke from a bear channel on May 6 after blasting from a breakaway gap that sliced through both its 50-day and 200-day moving averages on very high volume. Take a partial position now and a full position if it dips below $5. The trading target is $6.50, but that may turn out to be conservative. Longer-term investors could achieve much higher returns.

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