JC Penney Analyst Downgrade Brigade Looks Atrocious

J.C. Penney Co. Inc. (NYSE: JCP) is in the midst of a crisis. After poor earnings rattled the stock, most of its investors and customers have to be imagining whether the company received the memo about the rather strong economy. If it’s doing this poorly in good times, imagine how poor its results would look in hard times.

24/7 Wall St. has looked at the earnings news already, but multiple research reports have been issued since. Is it a shock that most of the analyst coverage looks and feels just as bad as the earnings report?

J.C. Penney shares did not just hit a 52-week low of $1.75. It appears to be a low not seen in over 30 years, and it was challenging all-time lows. The 52-week high is $4.75, and the retailer had an exponential volume spike of about four times the normal 16.4 million shares for a normal trading day. And now J.C. Penney has a market cap of only about $550 million, versus last year’s sales of close to $12.5 billion.

So far, we have tracked four different analyst calls in which analysts downgraded their rating or price target. And if history repeats itself, there will be more of the same on Friday as most analysts issue their big formal reports a day after earnings.

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Merrill Lynch issued a two-notch downgrade to Underperform from Buy. The firm also slashed its price objective to $1.25 from $5.00. The firm notes the risks mounting, the slow progress and the guide-down and lower-than-expected free cash flow (despite inventory reductions) are all adding to the negative side here.

Credit Suisse maintained its Underperform rating and lowered its target to $1 from $2.

CFRA (S&P) maintained its Hold rating but cut its target to $2 from $3, based on wider losses and now seeing flat comparable sales from slightly positive.

JPMorgan lowered its rating to Underweight from Neutral.

The firm MarketAxess also has reportedly noted that J.C. Penney’s 5-7/8 percent bonds due in 2023 went under 90-cents for the first time since being issued in mid-2016.

Moody’s already downgraded J.C. Penney’s corporate credit rating to B2 earlier this summer, based on continued weak operating performance and uncertainty.

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It’s looking ever closer to the time for J.C. Penney as a stock to be considered “The Penny.” Now for the big question: Will it be J.C. Penney or its troubled rival Sears that can hang on as a viable entity, or as a public company, the longest?

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