Rob Black's Retail Stock Report (CC, AEOS, COH, APPB, OSI)

by: Rob Black

Piper Jaffray upgrades Circuit City Stores, Inc. (NYSE:CC) to Outperform with a $40 target price. They believe that the combination of the HDTV cycle and a turnaround story will drive shares up.

Credit Suisse upgrades American Eagle (AEOS) to Neutral and raises their target to $32. They believe that the momentum in the business will enable the company to achieve reasonably good results despite difficult comparisons.

Credit Suisse upgraded Coach, Inc. (NYSE:COH) to Outperform and raised their target to $40. The stock is down 20% off its highs. The firm says expectations are overly pessemistic. They say the company is being punished based on bigger picture macro based fears, while the co is showing no signs of slowing down.

CIBC downgrades Applebee's International, Inc. (APPB) to Sector Performer and $22 target. The downgrade is based on their view that the company is entering a period of widening and protracted sales softness and decreasing earnings visibility which is causing the shares at best to trade sideways over the next few quarters.

CIBC downgrades Outback Steakhouse [OSI Restaurant Partners, Inc.] (OSI) to Sector Performer and $40 target. The downgrade is based on expected persistence of soft sales and EPS pressure at least through 3rd quarter, the likelihood that the comppany will need to embark on a larger-scale remodeling effort, and likely no near-term decision on strategic alternatives.

Harris Nesbitt upgraded Royal Caribbean Cruises, Ltd. (NYSE:RCL) to Outperform from Neutral. The price target goes to $48 from $45. Note that the stock has fallen 13.5% yr-to-date because of an exaggerated reaction to concerns about higher fuel costs and a softer-than-anticipated bookings during the wave season for Caribbean cruises.

Lodging stocks have been doing well as the average daily hotel rate is expected to climb to $96.69. Optimism abounds in the lodging sector that this year will outperform last year, which was the industry's best ever. In 2005, lodging operators reported profits of $22.6 billion on revenue of $122.7 billion.

Increased travel produces stronger demand for lodging space, spurring hotel companies to charge more. This year, only 75,000 new hotel rooms will be added to U.S. inventory, 43% fewer than the 132,000 new rooms added in 2000. Hotel-condominium conversions, a phenomenon sweeping Chicago, New York, San Francisco and Los Angeles, has also been a big boost for the industry.

Wall Street has generally remained bullish on lodging stocks as Marriott (NYSE:MAR), Hilton Hotels (HLT-OLD) and Starwood Hotels (HOT) have reported strong profits in recent quarters. The big three have continued to sell hotel properties to private-equity funds and real-estate investment trusts. Their focus on hotel management and franchise fees rather than on ownership has paid off in the current boom cycle.