Markets Underestimate One Thing About J.C. Penney

May. 9.13 | About: J.C. Penney (JCP)

For almost two years, J.C. Penney's (NYSE:JCP) stock has been dropping like a stone, while other retail stocks have been soaring, and for a good reason: J.C. Penney's revenues and earnings headed south, while revenue and earnings for Macy's (NYSE:M) and Kohl's (NYSE:KSS) headed north (see table).


Forward PE

Qtrly Revenue Growth (yoy)

Qtrly Earnings Growth (yoy)

Operating Margins

J.C. Penney




-3.95 %











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On Wednesday, J.C Penney's stock soared - up 6.5 percent. The catalyst? An update on the company's cash position that must have calmed investor fears about the company's liquidity - the update follows a vote of confidence by George Soros last week. The legendary financier took a "passive" 7.8 percent stake in the company; a financial arrangement with Goldman Sachs (NYSE:GS) that didn't include any equity stake by the financial firm.

These developments come shortly after the company changed strategy, returning to the old sales promotions to be implemented by the appointment of J.C. Penney's old CEO replacing Ron Johnson.

As of the action in J.C. Penney's stock, we believe it reflects a conviction among long-term investors that a refurbished and modernized J.C. Penney with a renewed marketing strategy may leave other retailers in the dust--something that markets have so far underestimated, as short-term investors have been paying too much attention in the bad rather than the good legacy of Ron Johnson.

Disclosure: I am long JCP, AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.