J.C. Penney Company, Inc. (NYSE:JCP) released its earnings report for the three months ended June this morning, and shares have been rising in today’s trading despite the miss on earnings. Despite the rising stock, and some big long interest from hedge funds, some analysts are still not convinced that J.C. Penney is a good bet.
Deborah L. Weinswig, an analyst for Citigroup Inc (NYSE:C), rated stock in JCP a Sell in a report released after this morning’s earnings. J.C. Penney Company, Inc. (NYSE:JCP) beat the analyst’s expectations on sales and gross margin, but missed big on earnings. This morning’s market doesn’t seem to mind that miss, but it hasn’t changed Weinswig’s opinion.
J.C. Penney survival
In this morning’s report J.C. Penney Company, Inc. (NYSE:JCP) revealed that it lost $2.66 per share for the three month period. Silver linings were, however, seen in the company’s better than expected gross margin. The firm was expected to lose $1.14 in the quarter on revenue of $2.8 billion. Weinswig maintained her $11 per share price target on J.C. Penney stock.
The Citigroup Inc (NYSE:C) analyst was expecting a 15% contraction in sales for the quarter, while sales actually declined by 11.9%. Gross margin for the period declined by 705 basis points, beating the decline of 910 basis points expected by Weinswig. On this morning’s market shares in J.C. Penney Company, Inc. (NYSE:JCP) jumped, standing at $13.73, up 3.86% on the day’s trading.
Kyle Bass bets against failure
Earlier today a Bloomberg piece revealed that hedge fund manager Kyle Bass has made a bet on the survival of the retailer. According to the piece, which sourced unnamed people familiar with the matter, Bass bought into J.C. Penney Company, Inc. (NYSE:JCP) debt. Bass’ bet on the company doesn’t require it to beat on earnings, however, it just requires survival.
Bass’ bet on J.C. Penney Company, Inc. (NYSE:JCP) puts him in good company. Many other top hedge fund managers are betting on the company’s long term success, though most are betting on the firm’s stock rather than its debt. Bill Ackman and George Soros are both betting on the company with 17.7% and 9% of the company’s stock respectively.
The $11 price target put on the company by the Citigroup Inc (NYSE:C) analyst would mean a bad year for Soros and Ackman, should the prediction bear out. Kyle Bass, however, doesn’t really need to watch the share price. As long as J.C. Penney Company, Inc. (NYSE:JCP) keeps itself together, Bass should win out on this bet.