JCPenney (JCP) stock fell 5.8% on February 24, 2017, to $6.46 in reaction to the company’s mixed results for fiscal 4Q16.1 As we discussed previously in this series, JCPenney beat analysts’ earnings expectations for fiscal 4Q16 but lagged the sales estimates.
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On February 28, 2017, JCPenney’s stock price fell 23.7% on a YTD (year-to-date) basis. JCPenney stock was hit by news of weak holiday sales reported by the company, as well as by its peers Macy’s (M) and Kohl’s (KSS), in January. On February 28, the stock prices of Macy’s, Nordstrom (JWN), and Kohl’s (KSS) fell 7.2%, 2.6%, and 13.7%, respectively, on a YTD basis.
On a YTD basis, JCPenney stock has underperformed the S&P 500 Index (SPX), which was up 5.6% on February 28. This movement is in contrast to 2016, which saw JCPenney stock rising 24.8% compared to the S&P 500 Index, which was up 9.5%.
On February 28, 2017, 12 out of 25 analysts (48%) had a “hold” recommendation for JCPenney (JCP) stock, 11 analysts had a “buy” recommendation, and two analysts had a “sell” recommendation. JCPenney has been consistently improving its bottom line and delivered its EBITDA2target of $1 billion in fiscal 2016.
However, the company’s top line continues to be weak due to the impact of intense competition from online retailers like Amazon (AMZN) and off-price retailers like TJX Companies (TJX). To optimize its retail operations, JCPenney plans to close about 130–140 stores and two distribution facilities over the next few months.
On February 28, the 12-month price target for JCPenney stock was $8.86. This price estimate indicates a return potential of about 40%, compared to the closing stock price of $6.34 on February 28.
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