Staples' Stock Rallied After Analyst Boosts Rating, Price Target

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Shares of Staples Inc. rallied 3.6% in afternoon trade Monday, boosted by an upgrade by UBS, which said investors are underestimating the likelihood of the company closing its acquisition of fellow office supply retailer Office Depot . Analyst Michael Lasser raised his rating to buy from neutral, and his price target to $20, which is about 19% above current levels, from $18, saying the recent weakness in the stock had created an "attractive entry point. Prior to Monday's surge, Staples' stock had lost 10% year to date. Lasser said the near-term path for the stock will depend heavily on the company's ability to close Office Depot purchase. "We estimate the market is only assigning a 35% likelihood to the deal's success," Lasser wrote in a note to clients. "Based on our discussions with [Federal Trade Commission] experts and large enterprise [office supply] customers, we think a more realistic probability is about 65%." Even if the FTC blocks the deal, Lasser believes Staples will be fine, because it will be facing a far-weakened competitor in Office Depot.

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