If you are looking to buy value buys in the current market, there are very few options that are as lucrative as the JCP stock.
You might wonder despite the recent beating that the JCP stock price took, how can you be so bullish about the stock?
Well, the fact that the JCP stock still holds a ‘Buy’ rating from most analysts should be a big indicator about the prospects that it offers.
Though the JCP stock price is hovering around 37-year lows, most value buyers would tell you that there is no time like now to enter the stock.
But the concern could be would you enter JCP just on the basis of brokerage views or is there a fundamental catalyst as well?
The good news is if you are logging on to NYSE JCP to buy, the company’s earnings performance as well as future plans are extremely encouraging in terms of the stock’s performance.
While the company’s website, jcpenny.com will furnish you with all necessary information about the company’s growth plans, you could also check New York Stock Exchange JCP.
The company’s financial performance is listed there too.
The JCP Stock Price Chart Analysis
As you can see on the below chart, the JCP stock price is almost at its lowest level during the past 37 years.
The price history shows that JCP is able to recover and take the price up again because it has already done that.
That is why buying the JCP stock can be known as a good investment right now.
The JCP Story
Before you take a call on the stock, it is important to understand the business fundamentals of the JCP stock and the overall business model that they operate upon.
This will make you better equipped to take a call on the prospects of the stock and how they stack up compared to peers.
Essentially this is a one stop shop for all kinds of apparel, jewelry, home furnishing and large home appliances.
Founded in Wyoming more than a century ago, it has over 100,000 associates.
Their huge range of products comprises of all the big, small, local and international brands worth mentioning.
What is particularly striking about JCPenney compared to its peers is the way the company is refashioning its trade and business execution in sync with the opportunities that’s being presented.
They have over 1000 stores across US and Puerto Rico and serve a host of international markets through the online retail forum on jcpenny.com.
They have a network of 13 supply chain facilities, 9 international offices, 11 international locations.
Under the leadership of the new Chief Executive and Chairman Marvin Ellison, the company has undertaken many cost saving expenses to rationalize the cost.
Many of the stores which were not contributing as much to the overall margins have been shut down.
JCP is also taking major steps towards filling the vacuum created by other retail players in the market.
They are investing big time in areas where other retail players are withdrawing to increase footfall in a significantly large manner.
Why Is the JCP Stock an Attractive Buy?
Though there are several factors that support buying the JCP stock at current levels, here are some primary reasons why the JCP stock price is rather attractive.
1) New Chairman’s Track Record
Chairman and CEO Marvin Ellison has been slowly bringing in a perceptible change in the way that the company has been performing.
For the first time since 2010, JCP recorded annual profits under this former Home Depot Executive.
It is needless to mention that the massive stock buyback that he undertook in the recent past went a long way in setting the tone for JCP stock movement.
Stock buyback by management invariably sends a positive signal about the stock’s prospects.
While you can debate the mettle of it, it undoubtedly signals a strong managerial commitment towards the company.
He has also resumed manager meetings which had been halted in the recent past.
Just recently he met up with more than 1000 managers in Dallas and discussed the future strategy.
Though it is a long way from the eventual profitability that JCP has set as a target, it is no doubt a good start.
Especially given the current slowdown seen in the retail space, the March US retail sales have registered just 1% growth on a monthly basis, and at an annualized rate, its growth rate is well below 5%.
The large appliances sales for homes are down close to 50%.
Despite that, under Marvin’s leadership, the JCP stock registered better than expected earnings.
It clocked a strong EPS gain and earned many ratings upgrade as well. So it is a reason enough to take advantage of the current slump in the JCP stock price.
2) JCP Is Betting on Sears’ Loss
The strategy that the JCP management has been adopting to revamp the company’s slumping prospects is rather interesting.
Under Ellison’s leadership, it is continuously looking to capitalize on the space that is created by other retail players.
In this, a big mention needs to be that of Sears.
In an effort to stall the looming bankruptcy prospects, Sears Holding is downsizing in a big way, and JCP is aggressively targeting all those markets.
Soon after JCP delivered positive net income in 2016, it added home appliances in the product range across 500 major JCP stores.
By the end of this year, it plans to extend the same services to 100 more stores.
As per the earnings call soon after the company’s exceptionally positive q4 results, the management said they are very pleased with the appliance sales recorded in these 500 stores.
In keeping with the strategy to focus on the gap created by Sears Holding, they are targeting non-apparel retail segments that are registering strong growth.
The JCP Home Services is an extension of that initiative.
3) The Big Valuation Bet
The fundamentals apart, on sheer price trends, the JCP stock price is hugely undervalued at current levels.
It has registered 34% drop in the past few months and trading close to 37-year lows.
In the past three years JCP, the stock has shown clear signs of ascending valuations.
It turned completely profitable for the first time since 2010.
Not just that the JC Penny’s decision to close nearly 140 stores that were loss making is seen as a major cost rationalization factor.
This move is likely to save $200 million annually in terms of expenses.
Though these stores account for more than 10% of their total feet of brick and mortar stores, in terms of sales, they are not even 5% of what JCP sales record.
Just in the first half of the year, the company pegs to record $225 million in pre-tax collections from various non-cash asset liquidation, lease termination, legal expenses and the like.
Assessments that two-third of US homes are over 30 years old and the total expenses that they might be undertaking for any possible upgrade would equate to almost $300 billion every year is another positive in favor of the JCP stock price.
It also makes NYSE JCP far better qualified to tackle the slowdown in the brick and mortar retail market as compared to its peers.
4) HedgeFund Holdings
BlackRock shareholding is one of the top shareholders in the JCP stock.
They are the world’s largest money managers, and they sure know how to make money.
After all, BlackRock is one of the very few entities that recorded profit after the bloodbath seen in markets post the Lehman crisis in 2008.
They have increased their holdings to over 23 million shares of JCP stock.
That brings up their current shareholding close to 8% from 6.8% earlier at 20.9 million shares.
This stake hike happened in just a year’s time, and that sure has an implication on the stock’s prospects.
In fact, in the same time that they hiked the stake, BlackRock’s asset management increased 11% $5.15 trillion.
Not only BlackRock, some other major hedge funds too boosted their holdings in JCP stock and thereby boosting the JCP stock price.
- Lazard Asset Management upped its stake in JCP by 3%
- Teachers Advisors raised their stake in JCP by almost 19%
- Appaloosa LP too bought JCP shares worth $42,214,000.
- Norges Bank too bought stake in JCP
5) Strong Financials of NYSE JCP
That eventually brings us to the financial health of the JCP stock.
Does the company’s financial performance support the projected valuation matrix?
Well, the short answer to that would be a yes.
Its current market cap is over $1.7 billion, and the projected 2017 PE or the price to earnings ratio of JCP stock is at a whopping 190 as per estimates on the Nasdaq.
For 2018 and 2019 too, the PE ratio is estimated to be positive as well, albeit significantly lower at 15.39 and 9.17.
The 5-year earnings forecast as per Nasdaq pegs JCP stock clocking 16% gains over the next years.
For January 2018, earnings are seen rising almost 500% while for 2019 the earnings growth is likely to moderate to 25% plus levels.
Though 2020 might see a slight dip given the cyclical nature of the retail markets, the 5-year projections is a big positive for most that are targeting on the long-term JCP story.
For the current quarter, it reported EPS growth of $0.64 beating most analyst expectation.
The net income for JCP in the same period was close to $4 billion.
The consensus EPC forecast for 2018 is slightly lower at $0.48 but the following year’s projection again sees JCP stock recouping to $0.61 levels.
So overall in terms of a financial matrix, the JCP stock price represents sheer value not just in technical trends but hardcore balance sheet computation as well.
This is exactly why despite the recent 34% dip in the stock price; most brokerages issued an upgrade for the stock and also gave a significantly higher target price.
The buyback by the JCP Chairman above these levels is also a big boost for the sentiment.
6) JCP Stock Brokerage Upgrades
That brings us to the next level of the JCP stock price analysis.
As per the most recent reports, nearly 48% of the most important brokerages have issued an upgrade on the JCP stock price.
Almost 12 of the 25 analysts who cover the JCP stock thus far.
The ‘Buy’ rating no doubt has been a big sentiment boost for the stock on an average.
It also highlights the large buying opportunities seen in this stock at current deflated levels.
This is particularly interesting as the upside from current prices is huge.
Then what exactly is the 12-month target price for the JCP stock?
While consensus for the 12-month price target for JC Penney is around $9.99, some of the rather optimistic targets see the stock moving as high as $11.
Though JCP registered close to 15% drop in share prices in 2017 thus far, the price target represents over 40% upside even at the lowest levels.
This clearly highlights the strong growth cycle that the stock price is likely to see going forward over the next five years especially.
While 48% of the analysts have a ‘Buy’ rating, the other significant chunk, nearly 44% of the brokerages have a ‘Hold’ rating on the stock.
This is mainly on the basis of the consistent improvement seen in the JPC bottom line and earnings performance.
For those looking at a steady and consistent performer in the retail space, these brokerage views surely highlight an outright winner in this perspective.
JC Penny management’s initiative in boosting the company’s online growth drivers is another catalyst for the favorable brokerage views and the rather encouraging ratings that the JCP stock has registered.
This is particularly interesting in the face of the huge beating that the stock price has taken since the beginning of the year.
Should You Buy the JCP Stock?
Overall, the total hedge fund ownership in the JCP stock is as high as 85%.
Often this stock is likened to what Amazon was 20 years ago.
While we cannot have a time machine to take us back to invest in the Amazon story 2 decades back, New York Stock Exchange JCP surely offers the same prospects in the modern perspective.
- It is open to change
- The management is continuously undertaking innovation
- Offers huge growth potential despite slowdown seen in the retail space
- JCP stock undervalued at current levels and represents huge upside potential
Therefore all in all, JCP is a winning financial prospect replete with constructive future growth potential and strong hedge fund support.