Good News: Talbots Soars 20% on Upgrade

Good news: Talbots'(TLB Quote) looming threat of bankruptcy has apparently eased.

Not disappeared, mind you, only eased -- still, this lowered fear resulted in an upgrade by analysts at FBR Capital Markets and is sending the company's shares soaring more than 20% in morning trading.

Analyst Adrienne Tennant upgraded Talbots to outperform from market perform and doubled her 12-month price target to $4, citing stability in its liquidity problems.

Heading into the second-half of the year, Tennant said, the immediate risk of the company filing for bankruptcy is low, since most retailers file Chapter 11 at the end of the year. This gives Talbots a six-to-eight month window to get its act together.

The women's apparel retailer has increased its credit facilities and postponed debt payments, cutting the risk of a "liquidity crisis in the near term," Tennant said. The sale of its J.Jill chain could also push shares higher, and Talbots has taken steps to buy goods primarily from one big company, rather than fragmented groups of vendors, in order to simplify the delivery of its product and reduce expenses.

Tennant, however, still expects operating losses this year and in 2010 and recommends the retailer for "more speculative investors" who are willing to bet on a riskier stock.