Analyst Warns of Short Squeeze in Big Lots (BIG)

Big Lots (NYSE: BIG) could see a short squeeze following its Q2 beat and raise, said analyst Paul Trussell of Deutsche Bank.

Trussell commented, "BIG has undergone a major transformation leading to consistent sales gains, reduced markdowns, a leaner cost structure, and improved free cash flow. Management’s efforts were showcased in 2Q results as BIG: (1) reported SSS of 2.8% that topped estimates, including our 2.5% forecast; (2) held GPM flat YOY while also ending the quarter with inventory levels in line with SSS growth; (3) had SG&A expense growth of only 0.5% YOY despite ongoing investments in-store and with e-commerce; and (4) produced adj. EPS of $0.40 (+29% YOY), ahead of its own guidance for $0.31-$0.35 and our $0.33 view partly driven by completing the share repurchase program for the year earlier than expected. Coupled with solid 3Q guidance for SSS of 2%-3% and FY guidance taken up by $0.10 to $2.90-$3.00, we believe shares should benefit from a modest short squeeze this morning."

Deutsche Bank reiterated a Buy rating on the stock with a price target of $54.

For an analyst ratings summary and ratings history on Big Lots click here. For more ratings news on Big Lots click here.

Shares of Big Lots closed at $42.00 yesterday.

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