J.P. Morgan Reiterates Neutral on BJ's Wholesale (BJ)

J.P. Morgan is out with a research report this morning, where it reiterates its Neutral rating on BJ's Wholesale Club

; it has a $38.00 price target on the stock. The JPM analysts cited a recent meeting with company management; the analysts noted that, overall, management seemed comfortable with long-term store growth goals, pace of technology investments, and membership fee opportunities, particularly its under-penetrated Rewards program. The analysts noted two key takeaways: 1. Competition is still tough with trade down continuing to be an emerging theme. 2. Flushing continues to be an issue. Recall that BJ's Flushing Queens store led to a $0.05 EPS guide down last quarter. As for valuation, the analysts remarked, “On valuation, the stock is trading at 16.1x our 2011E EPS, a 6.0% discount to its historical multiple, and at 6.0x 2011 EV/EBITDA. Our best-case scenario (25%) for the stock includes a forward P/E multiple of 17.0x and 7.0x EV/EBITDA. Conversely, our worst-case scenario (25%) implies a forward P/E multiple of 14.0x and 4.0x EV/EBITDA. The base-case scenario (50%) implies a forward P/E multiple of 15.5x and 5.5x EV/EBITDA.”