Fears of a capital raise are "off the table" says Wells Fargo's Paul Lejuez, pulling his sell rating and raising the PT to $6-$7 from $4-$5. FQ4 was a weak one, but management "took a more confident tone, giving decent fiscal 2014 guidance that featured comp and GM improvement. FQ4 expense savings seem permanent and are expected to flow through to fiscal 2014."
"While we can still argue that the stock may not present much value to equity holders, the company itself seems to be standing up better that many previously thought."
Acknowledging what looks to be a big rally today, Goldman's Stephen Grambling continues to have concerns: "1) if merchandise margins are back at 2011 levels on "good" product and discontinued brands were only a 190bp headwind, what else is pressuring gross margin vs. history; and 2) with 390M in interest expense and $4B in SG&A, JCP would require $4.4B+ in gross profit or a high 30% margin to generate positive EBITDA on LSD-MSD comps."
He also notes the stock isn't necessarily cheap compared to peers. "Our price target and rating (Neutral) are under review."
Earlier earnings coverage
JCP +25% premarket