Zacks Investment Research upgraded shares of Hot Topic Inc. (HOTT) from NEUTRAL to OUTPERFORM on July 13, 2012, with a target price of $11.00.
Based on Hot Topic's robust quarterly performance, we have upgraded our long-term recommendation on the stock to Outperform. Driven by strong sales performance along with cost-reduction plans, Hot Topic's first-quarter 2012 earnings of $0.09 per share came ahead of its prior-year period break-even earnings, beating its own guidance range of $0.07 – $0.08. The strategy resulted in a robust year-over-year expansion in the company's gross and operating margins. Bolstered by strong quarterly results, Hot Topic expects to cut losses to $0.04 to $0.06 in the second quarter, driving it significantly down from a loss of $0.14 in the previous year. We believe the company has a promising future given its history of consistent performance, solid niche market position, strong brand portfolio, ongoing cost cutting initiatives, ability to tweak merchandise in line with the rapidly changing trends and debt-free balance sheet.
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