J. C. Penney (JCP) Stock is 'Dead Money' for Next Two Years - Imperial Capital

May 30, 2013 9:43 AM EDT Send to a Friend
Get Alerts JCP Hot Sheet
Price: $7.59 -1.81%

Rating Summary:
    5 Buy, 13 Hold, 9 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 24 | Down: 28 | New: 14
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Imperial Capital assigned a BUY rating to J. C. Penney (NYSE: JCP)'s new $2.25bn senior secured term loan due 5/22/18, but maintained a Underperform rating and $10 price target on the common.

Analyst Mary Ross-Gilbert comment, "We are maintaining our on the common stock and one-year price target of $10, despite using a lower net present value hurdle rate and a higher revenue valuation multiple. 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."

She continued, "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%, down from 38% on 4/29/13) and headlines, in our view, but is fundamentally "dead money" over the next two years."

For an analyst ratings summary and ratings history on J. C. Penney click here. For more ratings news on J. C. Penney click here.

Shares of J. C. Penney closed at $17.92 yesterday.


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