J.C. Penney Shares Considered ‘Dead Money’ Over Next Two Years [REPORT]

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J.C. Penney Shares Considered ‘Dead Money’ Over Next Two Years [REPORT]
By J.C. Penney (Brand New design website See article here) [Public domain], via Wikimedia Commons

An analyst at Imperial Capital considers the shares of J.C. Penney Company, Inc. (NYSE:JCP) as “dead money” over the next two years, according to StreetInsider.

J.C. Penney Shares Considered ‘Dead Money’ Over Next Two Years [REPORT]

Rating For J.C. Penney:

The research firm maintained its ‘underperform’ rating and 12-month price target of $10 for the common stock of J.C. Penney Company, Inc. (NYSE:JCP) while the company’s $2.25 billion senior secured term loan due on May 22, 2018 received a ‘buy’ rating.

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In a note to investors, Imperial Capital analyst Mary Ross Gilbert said despite using a lower net present value hurdle rate and a higher revenue valuation multiple, the research firm maintained its rating and one year price target of $10 for the common shares of J.C. Penney Company, Inc. (NYSE:JCP).

According to Ross-Gilbert, “While the additional debt alleviates liquidity risk and is reassuring to vendors, it is necessary to fund ongoing cash burn as management works to stabilize revenues and restore profitability.”

“Further, the incremental debt and interest expense reduces enterprise equity value. We think the shares will likely remain volatile—recent bias to the upside is attributed to high short interest (now 27 percent, down from 38 percent on 4/29/13) and headlines, in our view, but is fundamentally “dead money” over the next two years,” added Ross Gilbert.

Earlier this month, Howard Davidowitz, chairman of Davidowitz & Associates and a retail investment banker expressed the same conviction about J.C. Penney Company, Inc. (NYSE:JCP) during an interview with The Daily Ticker. Davidowitz believed that investing in the company is like investing in a “cadaver.”

Davidowitz said, “This was a company that years ago was doing $20 billion in sales. Now the company is doing $12 billion with more stores.” According to him the company is a disaster and everything it did was wrong.

He added, “If you want to invest in retail, I would not invest in J.C. Penney. You’re investing in cadaver. It’s going nowhere but down, the worst is yet to come.”

J.C. Penney Announced:

Last month, J.C. Penney Company, Inc. (NYSE:JCP) announced that it has drawn its $850 million credit facility to ensure continued liquidity and to make vendors feel comfortable to take accept orders for the 2013 holiday season.

Despite the negative views about the J.C. Penney Company, Inc. (NYSE:JCP), billionaire investor George Soros revealed last month that he owns 7.9 percent stake in the company, which drove the stock higher. He is the fourth largest shareholder of the company.

The stock price of J.C. Penney Company, Inc. (NYSE:JCP) is trading around $17.77 per share On Thursday around 11:52 AM in New York.

Updated on

Marie received her Bachelors Degree in Mass Communication from New Era University. She is a former news writer and program producer for Nation Broadcasting Corporation (NBC-DZAR 1026), a nationwide AM radio station. She was also involved in events management. Marie was also a former Young Ambassador of Goodwill during the 26th Ship for Southeast Asian Youth Program (SSEAYP). She loves to read, travel and take photographs. She considers gardening a therapy.
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