Shares lost 3% Monday after jumping 16% on Friday following the company’s not-as-bad-as-expected earnings report. But the momentary euphoria appears to have been replaced with a strong dose of reality.
While it is true that the first quarter was not as bad as feared, the only reasons for the better performance are that no one expected much, and last year’s performance was so bad that J.C. Penney would have had to close the doors to its stores for a few days to match last year’s dismal showing.
Wells Fargo’s analysts were not fooled:
JC Penney’s high level of debt likely leaves very little value left for equity holders, a concept which we believe is extremely important to understand for those that are intrigued by slightly better comps in Q1. Considering this dynamic, we believe the stock is overvalued at current levels …
Analysts at Morgan Stanley said this Monday:
JC Penney’s 1Q was better than our/consensus estimates but management’s free cash flow neutral guidance appears optimistic. … JC Penney is moving toward a legacy strategy that has proven unsuccessful before.
Shares dropped another 4.3% by Tuesday afternoon to trade at $8.96, in a 52-week range of $4.90 to $19.63.
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