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With shares of Staples (NASDAQ:SPLS) trading at around $10.62, is SPLS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Not many people are bullish on Staples these days. That’s because they’re thinking about the brick and mortar segment of the company. While traditional retail still accounts for the majority of revenue for Staples, the online segment is growing at a rampant pace. Staples isn’t just the largest office supply chain in the world, it’s also one of the largest online retailers in the world. Staples does over $10 billion in online annual revenue. Therefore, if you’re worried about Amazon (NASDAQ:AMZN) knocking Staples out the online competition, you’re being paranoid. Staples has its own niche, and while Amazon is a serious threat to many online retailers, that isn’t the case here. Another important note is that Staples has one of the fastest online delivery speeds for online retailers, which is essential for anyone ordering business-related materials.
Another big positive is that Staples is focused on cutting costs. The goal is to cut costs by $250 million within the next two years. Then there are smaller positives. Customers were recently asked if they would buy more products if there were more products available. They said “yes.” Logically, Staples plans on adding more products. Staples is also making an effort to expand product-related services.
As far as the 3D printing business goes, Staples is expected to be a leader. Consumers will have an opportunity to upload design files and then pick them up at Staples. However, another company is likely to come along and improve convenience or price, which will lead to a long-term battle in this area. This isn’t as important as previously mentioned factors since the upside potential for 3D printing isn’t that high. The 3D printing business is expected to be a $5 billion industry within a few years. If you look at annual revenue for Staples, this isn’t a significant factor. But it does have the potential to help…
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