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Do Analysts See Any Upside in JCPenney Stock?

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Dec. 24 2018, Updated 7:31 a.m. ET

Current recommendations

JCPenney (JCP) stock was down 62.3% on a year-to-date basis as of December 19. The stock currently doesn’t have a “buy” recommendation from any of the 15 analysts covering it. Ten analysts have a “hold” recommendation while five analysts have a “sell” rating. Following the company’s third-quarter results in November, the company’s price target fell to $0.85 from $1.00 at Credit Suisse. Telsey Advisory Group revised its price target for JCPenney stock to $1.25 from $2.00. Craig-Hallum lowered its price target to $1.50 from $2.00.

As of December 19, the average 12-month price target for JCPenney stock was $1.40, which indicates upside potential of 17.6%.

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Can the company turn around?

JCPenney’s declining revenue over the past three quarters has made investors skeptical about its chances of a turnaround. Despite focusing on categories like beauty, home, and women’s apparel, the company is unable to deliver the desired results. Investors and analysts are concerned about whether JCPenney’s future will turn out like Sears’s, which filed for bankruptcy in October. The closure of Sears and Toys “R” Us stores was expected to benefit mid-tier department store chains like JCPenney. However, JCPenney’s third-quarter performance didn’t indicate any such positive impact.

In contrast to JCPenney, Macy’s (M) has been able to improve its performance through its strategic moves, including expansion of its off-price Macy’s Backstage stores and focus on digital sales.

JCPenney is sitting on a huge long-term debt of $4.2 billion. The company’s margins continue to shrink. New CEO Jill Soltau, who has vast experience in the retail sector, has a challenging task ahead of her to revive JCPenney’s chances of survival in this highly competitive retail environment.

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