Morgan Stanley Upgrades Finish Line Calling it "Our New Top Small Cap Idea"

In a note released Friday Morgan Stanley upgraded Finish Line Inc. (NASDAQ: FINL) from Equal-weight to Overweight.Morgan Stanley analyst, Jay Sole describes why Finish Line appears to be in such a good position by beginning with Finish Line's ability to produce high quality results despite heavily reduced mall traffic over the last quarter. Sole looks to a "strong" new product pipeline, as well as the continuing health and wellness trend as a driver for Finish Line's premium running footwear business through 2014. In addition to this, Sole notes Finish Line will show case new Nike (NYSE: NKE) styles a month earlier than other retailers, which is significant given Nike represents 65-70 percent of Finish Line's sales.Looking to the competition, Sole believes that although the street seems to be favoring Foot Locker (NYSE: FL) over Finish Line currently, this should change given the companies "very similar characteristics". Moreover while both companies trade near 15x, Sole models a 13 percent CAGR for Finish Line versus 9 percent for Foot Locker.Turning to valuation, Sole has raised 2015 EPS estimates by 3 percent to $1.89, and notes his 2016 EPS estimate of $2.20 is 4 percent above consensus.