Over the last few days, Sterne Agee analysts upgraded JC Penney (JCP – NYSE) from a neutral rating to a buy rating with a price target of $13. After spending time with the JCP’s new CEO, the firm became a bit more confident in its turnaround plan, as the new guy focuses on previous core issues, efficiency, cost saving efforts and e-commerce.
But this is JC Penney…
The once thriving company is the shell of a company it used to be, facing quite a few operational issues over the year. While we can always hope the new CEO can turn things around, we also don’t believe many shoppers will break down the doors to shop there these days… unless of course there’s a deep discounted sale.
Some of the company’s key metrics are turning higher, and we hope they remain higher. Comparable same store sales were up 4.1% for example. But we have to remember that no meaningful free cash flow has been generated from continuing operations for some time now. Debt issues are a problem, as well.
Don’t get caught up in the upgrade here. Even if a long-term turnaround plan plays out well, there are better ways to trade the retail sector.
The latest move higher – in our opinion – is another reason to short the JCP stock.