Why Office Depot Inc. (NYSE:ODP) is a Strong Sell

by James Karedelli | Wednesday, Mar 26, 2014 | 1430 views

Boston, MA, 03/26/2014  (usastockreports)- Ever since Office Depot Inc. (NYSE:ODP) posted dismal fourth quarter and full year results, the company’s stock has been trading on a downward trend. The increase in the intensity of online competition continues to hurt the company’s sales, which has continued to drop. A loss of 3 cents a share in the fourth quarter was a clear indication of things not being well in the global supplier of office products.

Office Depot management team has already foreseen headwinds in the company’s product lines as well as distribution channels. Total revenue for the year is expected to be lower than total pro-forma sales registered in 2013. Operating income for the year is expected to come in at approximately $140 million.

Technological advancement affecting Office Depot

Constant technological advancements have greatly affected Office Depot products whose sales continue to drop. The emergence of smartphones tablets and laptops has not made things any better. Decline in business and consumer spending has also greatly affected Office Depot given the deterioration of credit markets amidst the uncertainties in the world economies.

Depot Inc. (NYSE:ODP) has been struggling over the past quarters to regain its momentum. This trend precipitated it to merge with OfficeMax in an effort of capturing incremental market share.   The merger with OfficeMax is also aimed at streamlining cost structure to compete at good levels with other industry peers.

Analysts continue to be less constructive about the company’s potential in the coming months as a result of increased competition.

Office Depot Stock Downgraded

The poor performance has precipitated many equity research firms to downgrade the company’s rating in the market. Analysts at Zacks currently have an “underperform” rating on the company’s stock  with a share price target of $4.50 with analysts at Jefferies group maintaining a hold rating with a price target of $5.

Depot Inc. (NYSE:ODP) continued to slump in the market in Tuesday trading session, its stock was down by 0.95% closing the day at a low of $4.15.

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