Citigroup Inc (NYSE:C) analyst Deborah Weinswig has dropped her price target on J.C. Penney Company, Inc. (NYSE:JCP) shares to $7 in the wake of revelations about the company’s deep financial troubles. The report is, as the price target would suggest, not very optimistic about the future of the retailer. Weinswig seems concerned about the company’s ability to make it through Christmas comfortably.

J.C. Penney

J.C. Penney Company, Inc. (NYSE:JCP) is a difficult company to value at this stage because it is difficult to figure out where the bottom on the company’s stock is. If the company does go bankrupt, equity holders might end up with absolutely nothing. That make’s Weinswig’s opinion on the company an interesting one. Her report is entitled, Where’s the Floor?

Selling J.C. Penney

Citigroup Inc (NYSE:C) rates J.C. Penney Company, Inc. (NYSE:JCP) a sell given the company’s cash flow problems. Weinswig sees one of the major problems at the company as being more difficult and strained relationships with vendors as they become suspicious of the retailer’s ability to actually pay them back.

The lower price target for J.C. Penney Company, Inc. (NYSE:JCP) is given without any change in the price target. That’s because the company changed the multiple on those earnings as a result of poorer metrics at J.C. Penney Company, Inc. (NYSE:JCP). That doesn’t offer an answer to the headline question, “Where is the floor?”

Weinswig says that the floor in J.C. Penney Company, Inc. (NYSE:JCP) stock is around $1 per share. The company is only worth $324 million if it stops acting as a business and starts acting as a group of assets. That means that the shares have a long way to fall before they hit the bottom of the barrel, and also means that shareholders in the company still have a large amount to lose.

Risk of failure at J.C. Penney

Because she is projecting the share price of the retailer to collapse, Weinswig offers positives for J.C. Penney Company, Inc. (NYSE:JCP) under her risks section. There is only one big move that could result in a higher price target according to Weinswig, and that would be the emergence of much better management at J.C. Penney.

Management could arrive at the company in many forms. There are a large amount of powerful hedge funds involved at J.C. Penney Company, Inc. (NYSE:JCP). Any one of those hedge funds could get involved at the top of the company itself, though that didn’t serve Bill Ackman too well; or, they could bring in talented managers from somewhere else.

Weinswig believes the company is going to have a lot of difficulty attracting that talent. Nobody wants to be associated with a sinking ship. Another risk to the Citigroup Sell advice is a better than expected holiday season at J.C. Penney Company, Inc. (NYSE:JCP).