It's time for dedicated long-term investors to take notice of J.C. Penney (JCP). The brand-name but besieged operator of more than 1,000 department stores in 49 states is finally starting to turn around -- and may be ready to blast off!

By now, everyone knows that Penney has been among the worst market performers in retailing, and is shunned by many, if not most, industry analysts. Apart from its much-criticized store renovations and an everyday low-pricing strategy initiated by new CEO and Chairman Ron Johnson, the company's e-commerce business is regarded as weak. Johnson was formerly a top executive at Apple (AAPL), and was responsible for its sleek and chic store format.

There’s been little Wall Street support for the store and pricing changes, causing JCP's stock to crash to a 52-week low of $16 a share on Nov. 16, 2012, from a lofty $43.80 in early February. Little wonder that the likes of Macy's (M), Target (TGT), and Amazon.com (AMZN) are more attractive to investors looking for opportunities in the retailing sector.

But JCP has reversed gear in recent days, inching up to $20 by Dec. 13, and some loyal investors see the stock rallying further from here.

"The JCP turnaround is still in the very early stages and remains fluid, but we are optimistic that over the longer term the strategies of CEO Ron Johnson and his team will eventually produce a more profitable chain," says Brian Nagel, analyst at Oppenheimer. He rates the stock as outperform, with a 12-month price target of $30.

Data suggests that JCP is adopting a more nimble stance toward price promotions and other initiatives, while maintaining the integrity of new brands in stores, says Nagel.

The analyst acknowledges that his outperform recommendation is a speculative call on the company's turnaround prospects, but it also reflects "our constructive longer-term outlook." He notes that the company has been running more time-sensitive and aggressive promotions that could greatly improve customer traffic.

"The company's aggressive strategic repositioning will ultimately produce a more profitable chain and a higher share price," Nagel asserts. It has increasingly been making bold efforts to display more value to consumers by marking down prices on many items earlier. For example, winter merchandise is being marked down at the start of the cold season.

"JCP ran a sale for 20-30% off outerwear this past weekend," notes Nagel. As the company is still  in the early stages of the turnaround, "it makes more sense to be more aggressive earlier in the season instead of heavily discounting and clearing merchandise later."

Obviously, what JCP is doing requires more patience from investors and its customers, says Nagel. The recovery taking shape will reward shareholders over time.

Already, the remodeled areas of JCP stores are performing well, with sales productivity in the new "shop-in-shops" more than 30% ahead of pre-reset levels, notes Nagel. Many of these showcase merchandise and brands new to JCP stores.

However, JCP still faces pervasive negative sentiment towards the changes. Short-sellers have been having a ball with JCP's stock, with about 30% of the float, or shares in public hands, being held short. But once the stock starts to perk up, the shorts will have to cover their positions, further fueling the recovery.

"We continue to believe the company can earn at least $3 a share over the long term," says Nagel. "But we recognize that following recent fundamental missteps, it will require more time for JCP to ultimately reach this objective," he adds.

No doubt, JCP is undergoing one of the most challenging but significant transformations in the history of the industry. But the JCP story is also one of retailing's more attractive longer-term investment opportunities.

"While we expect the company to benefit in the long run from restructuring, we don't see business materially improving until fiscal 2014 (ending Jan, 31 that year) at the earliest, given execution risks, a tepid economic recovery, a cautious moderate-income consumer, and intense competition," says Jason N. Asaeda of S&P Capital IQ. He rates JCP a "hold."

That may be true, but investors who wait for more evidence of the turnaround could miss the big upside move. In other words, by the time it becomes entirely clear that JCP is back on its feet, the stock will have already achieved much of its turnaround potential. It's the same risk-and-reward conundrum: the greater the risk, the greater the reward. Analysts expect JCP, which earned $1.35 a share in fiscal 2011, to post losses this year and next as it continues to execute its new strategic plans. But Oppenheimer foresees earnings of $1.85 the following year.

While near-term challenges are likely to persist, but JCP bulls are also optimistic that a much more profitable company will emerge. S&P's Asaeda figures JCP will earn $1.15 a share in fiscal 2014.  

Gene Marcial wrote the column “Inside Wall Street” for Business Week for 28 years and now writes for MSN Money’s Top Stocks. He also wrote the book "Seven Commandments of Stock Investing," published by FT Press.