J.C. Penney Company, Inc. (NYSE:JCP) will be removed from the S&P 500 at the end of the week, following years of declining market value. J.C. Penney Company, Inc. (NYSE:JCP) was one of the original companies listed on the index when it was first created in 1957 and one of just 68 of the original companies currently still on the list, reports Steven Russolillo for The Wall Street Journal. Since many investment products are benchmarked to the S&P 500 (INDEXSP:.INX), you can expect managers to start selling off J.C. Penney stock once it is officially off the index if not before.
J.C. Penney’s future
Analysts are divided on J.C. Penney Company, Inc. (NYSE:JCP)’s future, with some arguing that it has already started a slow turnaround and that the stock is currently undervalued, with others pointing out that it is losing market share in an already declining category (department stores), and that recent gains are because of markdowns and an over-reliance on private brands.
ValueWalk's Raul Panganiban David Barse, Founder and CEO of XOUT Capital, and discuss his unique approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with XOUT Capital's David Barse
J.C. Penney Company, Inc. (NYSE:JCP)’s third quarter losses increased year-on-year, with weaker sales and margins than had been expected, and after losing half its share price this year the company has a market cap of just $2.7 billion, making it one of three companies on the S&P 500 with a market cap under $3 billion.
The company expects to lose $780 million next year, but Baird analysts think that’s acceptable as long as it can improve traffic next year and return to profitability by 2015. Diluting shareholder equity to raise money is certainly on the table, but there are no concrete plans to do so right now.
Value stock or value trap?
For value investors wondering if J.C. Penney Company, Inc. (NYSE:JCP) is a good value stock (or will be soon, assuming the price drops when index-tracking investment products sell off the stock) the main question is simply whether the former retail giant can get new people into the store. It has already shown an ability to improve conversion rates, but if new customers won’t give the company a second chance than conversion rates aren’t good enough. Management has already warned that this holiday season will be heavy on rebates (other retail chains have made similar comments), but rebuilding the brand should probably be the company’s first priority right now anyway.