BTIG Goes Against Herd, Starts J. C. Penney (JCP) at Buy with $22/PT
"J.C. Penney (JCP) has suffered a number of operating reversals and negative headlines in recent quarters," analyst William Frohnhoefer comments. "While we expect continued volatility, we believe that the shares represent an option on the ultimate outcome of the firm’s transformation, and that this option is accompanied by a number of levers which favor the equity investor. Given JCP's current situation, we step away from a traditional retail analysis of JCP and take a creditfocused view. In our opinion the current risk/reward profile is attractive."
On liquidity, the firm said JCP has adequate access to cash to fund its operating program. They also have flexibility given that JCP's owned real estate is enough to cover its funded debt and unsecured debt has very light covenants for a firm with its credit rating and JCP can use this advantage. Lastly, the analyst cited operational potential: JCP is improving costs and working capital management, upgrading the product offering and spending to transform its physical and online store. They said their target is not dependent on remodel success, but "we think these iniatives will eventually have an impact and give JCP the tools it needs to recapture market share."
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Shares of J. C. Penney closed at $15.65 yesterday, with a 52 week range of $14.20-$37.91.