In late 2015, we warned about buying shares of JC Penney (JCP), as it traded at $9.27. Sterne Agee had just upgraded the stock from a neutral rating to a buy rating with a laughable price target of $13 a share. After spending time with the CEO, the analysts were confident in the company’s turnaround plan, as the new CEO focused on core issues, efficiencies, cost saving efforts and e-commerce.
But as we warned, the company was nothing more than a shell of the company it used to be, facing quite a few operational issues. Shortly after, the stock would fall to $6 a share. From there, investors bought again, believing the stock was finally turning around (yet again). This time, they sent the stock from a low of $6 to $11.78. Shortly after that, investors would learn another painful lesson, as the stock dove from $11.78 to $7.58.
7The stock is very likely to head even lower, as consumers cut back on spending, opting to save instead of spend. While the company issued the typical “feel good” press releases, all is not well. Sales fell 1.6%. Same-store sales were down 0.4% after rising 3.4% last year. Gross margins declined $23 million. They also burned through $394 million in the first quarter – 74% higher year over year. Sales have fallen 36% over the last nine years. They’ve lost billions. They’re loaded with debt. But management thinks all is well.
JC Penney is still on track for eventual bankruptcy. Stay away, as we continue to warn.