J.C. Penney flies 25% higher post-earnings


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

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Comments (12)
  • DeepValueLover
    , contributor
    Comments (11221) | Send Message
     
    We tried to warn the shorts but they were blinded by the past.
    27 Feb 2014, 09:19 AM Reply Like
  • Hector V
    , contributor
    Comments (777) | Send Message
     
    JCP is still down 20% YTD and I'm still carrying a very profitable short position, thank you very much. Ullman made a lot of sunny statements yesterday. We'll see if they can deliver.
    27 Feb 2014, 12:04 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11221) | Send Message
     
    STILL holding your short position?

     

    Good luck with that.
    27 Feb 2014, 01:09 PM Reply Like
  • Hector V
    , contributor
    Comments (777) | Send Message
     
    Very easy to hold when deep in the black. Went short at $17.
    27 Feb 2014, 01:11 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11221) | Send Message
     
    When will you cover?

     

    $14?

     

    $16?
    27 Feb 2014, 01:23 PM Reply Like
  • Hector V
    , contributor
    Comments (777) | Send Message
     
    I generally set a decision rule for selling for every position I take. It keeps the emotion out of the sell decision. For this position I'd settled on closing if either (1) BK is nearly fully baked in (<$2/sh in my estimation) or (2) gross margins get back to 35%. Obviously in case 1 I'll clean up and in case 2 I could be covering at a loss, depending on where shares are trading when the 35% GM prints. I've learned not to put too many eggs in one basket and if I cover at a loss life will go on. One has to have a closer mentality, as they say in baseball, and not let last night's blown save impact your next trip out to the mound.
    27 Feb 2014, 02:26 PM Reply Like
  • Lien Nguyen
    , contributor
    Comments (4) | Send Message
     
    If you really believe that, I would recommend you take more short positions immediately today and hold it until the next earning release. Hurry, before the stock pulls back tomorrow. Take as large a short position as you can. Not a bad idea to sell all of your other holdings and put on that capital of short of JCP.
    27 Feb 2014, 09:25 PM Reply Like
  • techy46
    , contributor
    Comments (11501) | Send Message
     
    You can still buy JCP around $7 and sell Jan 2016 $10 calls for around $1.70.
    27 Feb 2014, 12:36 PM Reply Like
  • CLUB 198
    , contributor
    Comments (105) | Send Message
     
    DVL...I agree...and if you read some of the SA/JCP posts the "shorties" refuse to give up their grip on their position; all indications are that the basis and extremely negagtive assumptions for their position has been proven false. Of course, the future of the company depends on the ability of management to deliver on the future articulated during yesterday's call...that's obvious. That said, I completely expect them to re-group and begin the "short" drumbeat again until the next earnings report proves them wrong AGAIN. I think this management team has earned a little more confidence from the forums.
    27 Feb 2014, 01:07 PM Reply Like
  • madmadison2002
    , contributor
    Comment (1) | Send Message
     
    wow, shorts got burned!
    27 Feb 2014, 02:09 PM Reply Like
  • shortsqueezer
    , contributor
    Comments (666) | Send Message
     
    the only thing that makes me a little nervous is the fact that there are still very few shortable shares available
    27 Feb 2014, 02:10 PM Reply Like
  • Atharion
    , contributor
    Comments (12) | Send Message
     
    Congrats to longs who bought in low.
    28 Feb 2014, 01:45 AM Reply Like
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