Could J.C. Penney shares sink to $1?

Analysts give the stock the dreaded 'underperform' rating, call it 'dead money' and twist the knife further with a $1 price target.

By Benzinga Oct 21, 2013 3:31PM
Shoppers at a J.C. Penney store in New York, NY on October 23, 2009 (© Mark Lennihan/AP)By Tim Parker

What makes for a really bad day at J.C. Penney's (JCP) corporate headquarters?


When your stock is reiterated a "underperform" and a $1 price target is placed on it. There are certainly a significant amount of people who advise never to listen to an analyst, but judging by Monday’s performance, the $1 price target was enough to send investors running and shorts feeling a lot better about their bet.


The stock fell nearly 8 percent Monday afternoon to $6.47 -- 85 percent lower than its high of $42.68 in February of 2012 and down 67 percent year-to-date. It doesn’t take a research report to judge Wall St. sentiment in this case, but a $1 price target is shocking.


Why the downgrade? Analysts at Imperial Capital give this explanation: “We are maintaining our Underperform rating on the shares, but we are lowering our one-year price target to $1 from $5. Our new $1 price target is based on the notional 'option' value of the shares, given our increasing concerns the company may engage in a financial restructuring in 2014."


While that sounds ominous, the report isn’t quite as bad as it sounds. The basis of the report is that the company may have the ability to stage a turnaround but investor sentiment, not helped by the media, continues to push the stock lower.


"Over time, we anticipate traffic and sales to recover, but the improvement in financial performance in F4Q13 may not be sufficient to instill confidence for equity investors and vendors."


It goes on to note that short interest in J.C. Penney was 26 percent as of Aug. 23 (as of Sept. 30, it was 38.6 percent.) High short interest might cause a large-scale short squeeze if unexpected good news surprises investors or a high-profile, deep-pocked investors announces a long position. In April, a regulatory filing revealed that George Soros’ Soros Fund Management amassed a 7.9 percent stake in the company sending the stock soaring 11 percent the next day.


But in the end, the report doesn’t see a lot of hope for the stock. "We fundamentally believe the stock is overvalued and likely dead money over the next couple of years," the analysts added.


Disclosure: At the time of this writing, Tim Parker had no position in the companies mentioned.


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90Comments
Oct 21, 2013 4:22PM
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They drove away their core and now their core knows they can shop at other places.  The JCP shopper was very loyal.  They should have recognized that and not kicked them to the curb like they did.
Oct 21, 2013 4:12PM
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wow - but then again...you turn your back on the good regular people who shopped at your stores, try to go high end and chase the crazy 'youthful markets', and get rid of your oh-so-popular-sales-discount-pricing policies....  and now you are a future 'study' for business schools to discuss what went wrong. 

 

too bad too - a great name in the anals of retail that may not make it much longer.

Oct 21, 2013 4:59PM
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Ron Johnson sure effed up this company.
Oct 21, 2013 4:10PM
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The slow death of the once great retail giant we all know as J.C. Penney is agonizing to watch!

They reaped what they have sown!

Oct 21, 2013 4:51PM
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I am a former JCP mgr. Market identification was an issue back in the late 70's early 80's already. I brought it up at a regional meeting once, the higher ups looked at me like I was nuts! Hmmmm, guess who was right in the long term.....................
Oct 21, 2013 5:58PM
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It's really sad to see what has happened to a once great store.
Oct 21, 2013 5:10PM
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I still like shopping at JCP.  I just came back from the store with some khaki Dockers and a really nice Stafford pinpoint white oxford shirt. Hang in there JC Penny.
Oct 21, 2013 6:03PM
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I HOPE SOMEONE SAVES THIS COMPANY IT'S A DAM SHAME

 

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Ron Johnson is worth more than the Company he ruined. The sad part is all the good people at JCP that lost their jobs and are hanging by a thread now.
Oct 21, 2013 5:10PM
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j c penny has one person to blame for the mess they are in.  the idiot they brought in (now departed) to run the company who changed just about everything that the company was known for.  it's fine to tweek certain things in order to try new ideas or fix obvious problems.  yet the old adage is if it ain't broke, don't fix.  it could never have been more true that with jcp.  this young, brash, wiz kid woman came in and thought she knew the new direction jcp should be headed, without considering how this would affect their current consumers.  the new image was so out there and stupid that not only did she lose their old customers, but they failed to draw the new ones she expected.  the company's performance was so dismal that they promptly gave her her walking papers, but the problem was that the damage had already been done.  this isn't an h g well's story, you cannot go back in time and undo the mess you've created, so jcp did the best they could with the cards they had been dealt and tried to pick up the pieces of the mess the departed ceo had left them with. but, the reality is it's too little too late. the damage has already been done and they are now just holding on by the skin of their teeth. it's not a matter of if they'll go under, but when.
Oct 21, 2013 5:31PM
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The new makeover is too staged - not touchable looking in the Home Dept. Like the new furniture displays - always have good mens' dept. - need to get rid of old fashioned Worthington pants, etc., and have more good quality clothing for women of all ages. I am 68 but still dress up-to-date and the only finds are in the Liz Claiborne line.  Better line of shoes needed also.  Definitely too few cash wraps. The new low price didn't work - Sears tried it eons ago and it didn't work for them either, guess if you had asked older workers they would have told you. Scaled down your drapes dept. - bad mistake...women like to see what they are getting. Store set up for appearances, not buying.
Oct 21, 2013 6:32PM
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What is with the anti JCP propaganda now? I mean MSN has been dogging JCP for a good 5 years with bad stories about them. I live only 20 minutes or less from two of their stores and 45 minutes from a third. I have been to all 3 and the clerks are fine, the locations all look sharp and they always have good sales. I also til a year ago lived about 8 blocks away from a Sears. I can probably say Sears is in trouble but not Penney's. The local Sear's doesn't even have enough $ to remodel, but Penney's has remodeled, etc. Not much has changed in the look of the store since I was a kid in the 80's. I still go there, mostly for shoes, tools, or Xmas stuff sometimes, but it isn't nearly on par with JCP or Macy's. I really think the whole JCP problem has a lot to do with bad press and just the rise of Amazon.com.
Oct 21, 2013 6:38PM
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I have always shopped at JCP and still do.  I don't find their clothing of poor quality, their store clerks rude, their prices too high, or any of the negative comments I see on the posts here.

 

I still think they are one of the best clothing stores around and as long as they are in business, I will shop there.

 

 

 

Oct 21, 2013 5:45PM
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Hey werent the analysts saying the same thing about Best Buy and HHGregg about the same time last year? Both stocks have more than tripled since then.
Oct 21, 2013 6:25PM
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A big part of the problem for JCP is that they insisted on marketing towards the small gay community, and it really turned off a lot of their longtime clientele.
Oct 21, 2013 4:59PM
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It would delight me to no end to see the George Soros fund loose it's entire 7.9 stake in JCP,& I would hope that the individual owns a lot of the shares personally.  A  "good" contributer to the marxist in D.C.
Oct 21, 2013 9:09PM
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They lost me with there gay and lesbian mothers and fathers day ads! Well let's see if that two percent can keep them afloat. And if you liberals don't like what I have to say, keep it to yourselves, I have no use for any of you.
Oct 21, 2013 4:59PM
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who is imperial capital. Never heard of them.
Oct 21, 2013 4:12PM
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J.C. Penney:

 

This was a doomed company waiting to fail.

 Why? Quality..

 

I could buy an item at Dillard's for a little more money and have a much better "Quality" product or wait for a sale and buy the same product for the same price I'd pay had I bought it at Penney's.

 

Is Penney's the next Woolworths , I don't think so. I say watch and buy..

 

Ford stock bottomed at about $2.78 now look it's somewhere around $17.00 - $18.00

 

   

Oct 21, 2013 5:56PM
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Sure and Penny's ruined a perfectly good drug store in Eckerd by syphoning the cash from their operating fund. Then sold out to a bad drug store, CVS. Good enough for them
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