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If there is one thing the market is learning in 2017, it's that no one in retail is safe from Amazon.com, Inc. (NASDAQ:AMZN)’s onslaught.
The office products category is no different, declining at a low- to mid-single-digit pace since 2010.
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“We expect this to continue as trends of digitization and mobility continue,” said JP Morgan analyst Christopher Horvers.
Justification For The Downgrade
As a result of the current trends, JP Morgan downgraded Office Depot Inc (NASDAQ:ODP) to Underweight from Neutral for four key reasons:
- Cyclically, these should be the best of times for Office Depot with unemployment low and the economy accelerating. Sales historically have been highly correlated to GDP, labor markets and industrial production. Instead, sales remain under pressure, with retail stocks down 43 percent since 2005.
- Office depot has been losing share in its business-to-business division and the competitive environment is getting worse with Staples now a private business and Amazon entering the business to business market.
- The CompuCom acquisition is a marriage of needs, with both companies urgently trying to find growth
- Office Depot has been using OfficeMax merger synergies to generate costs savings, but analysts don’t see a path where Office Depot cuts its way to prosperity.
Office Depot shares were down over 18 percent following the downgrade.
Related Links: Amazon Pharmacy Rumors Heating Up Again: Here's What We Know_________Image Credit: Ildar Sagdejev (Specious) (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 4.0-3.0-2.5-2.0-1.0 (https://creativecommons.org/licenses/by-sa/4.0-3.0-2.5-2.0-1.0)], via Wikimedia Commons
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.