Will a New Window Help Investors See More Clearly? (SPLS)

On October 26, Microsoft (NASDAQ: MSFT) will unveil Windows 8. In an effort to capture some early market share, Staples (NASDAQ: SPLS) announced a campaign where customers can pre-order the latest computers and tablets optimized for Microsoft Windows 8. The world’s largest office products company will also offer customers free personalized training, free support and free start up to anyone purchasing a Windows 8 computer. Is the launch of Windows 8, if successful, enough to help propel shares of Staples higher? This is a question that traders and investors might ponder. They also may ask whether reports about the death of the PC have been highly exaggerated.

Staples is not just counting on a successful Windows 8 campaign to lift its bottom line and the spirits of investors. Plans call for the closing of 30 stores in the United States plus the downsizing of another 30 by the end of 2012. The company looks to improve revenues from non-core items like mobile phones and break-room supplies. Finally, Staples plans to sell its European printing operations and rebrand the printing operations in Australia.

The last seven months have been trying times for Staples shareholders who saw the stock decline from an annual high of $16.93 in March to a 52-week low in August when shares traded for $10.57. The stock took a 15% tumble on August 15 after Staples released its second-quarter earnings, which showed a 6% decline in sales and an 18% decrease in per share earnings.

Share prices have recently shown some life as buyout rumors circulated. According to a Fortune Magazine story in September, some private equity firms, including Bain Capital, were giving Staples a look for a possible acquisition.

At this morning’s opening, shares of the office supply company showed little reaction to the news and two articles that appeared to shine a positive light on the company. The stock began the first day of the trading week a few pennies higher than where it ended the session on Friday. Within an hour of the opening bell, share prices reached the high for the day when they traded for $11.41. The intraday low of $11.10 was also established in the opening minutes. The morning also saw a good portion of the day’s volume trade. Trader enthusiasm waned as the lunch hour rolled around on the east coast. Shares of Staples ended the day with a gain of 10 cents, or nearly 1%, to close the trading session at $11.20. Volume on the day came in lighter than the amount traded on an average day. The number of shares exchanging hands during Monday’s session totaled over 12.4 million compared to an average of 16.73 million shares.

Twenty-one analysts with an average rating of “hold” cover the company. The consensus view has a mean price target of $13.00 on the stock. Staples currently pays a dividend of $0.11 on its shares for an effective yield of 3.95%.

Staples produces and distributes office supplies that include technology, furniture and business services. The company has customers in 27 countries on five different continents. The Framingham, Massachusetts-based company was founded in 1986.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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