Its shares are up 24% in one day. So, is the best deal at JC Penney its company's stock?
For almost a year, the beleaguered retailer has been trying to turnaround from its previous turnaround efforts. According to the company, it may be working. Along with its fourth-quarter results released Wednesday, CEO Myron "Mike" Ullman said:
"JCPenney achieved what it set out to do on a number of important fronts in 2013. We stabilized our business, both financially and operationally, and restored our process disciplines, promotions, inventory levels and focus on the customer. As a result, we generated positive comparable store sales in the fourth quarter and ended the year with more than $2 billion in total available liquidity. These important accomplishments reflect the progress we have made in our turnaround, which remains on course heading into 2014."
The company also touted its 2% same-store sales growth from the same time last year and its first quarterly sales increase in almost three years. As well, its gross margins were 28.4% versus 23.8% a year ago.
CNBC contributor Gina Sanchez, founder of Chantico Global, is taking a wait-and-see approach to the stock. "This past quarter was interesting," says Sanchez. "But, one quarter does not make a new positive trend."
Sanchez says Ullman has been doing the right thing by reinstating coupons and discounts, a practice that was put a halt by previous CEO Ron Johnson. And, she notes the company had positive same-store sales growth unlike competitors Wal-Mart or Kohl's. But, what Sanchez finds appealing in the stock is that its market capitalization of $2.3 billion is roughly the same as what it has in liquidity.
"It is a cheap stock," says Sanchez. "The question is can they position themselves for new growth? They have made some changes. They've discontinued some poor performing brands [and] that's going to also improve their margins. I think there's some cautious optimism here but I'm going to underscore the word 'cautious'."
Steve Cortes, founder of Veracruz TJM, is more optimistic on JC Penney's stock from both its technicals and its fundamentals.
"Yes, it's a small step," says Cortes of JC Penney's recent quarter's results. "I don't often quote Mao when I'm looking at my stocks but the journey of 1,000 miles begins with one step. This is a positive step for JC Penney."
On the technicals, Cortes notes the stock formed a double bottom pattern in the past month with the stock twice getting close to $5 per share. Between those to bottoms, the stock hit $6.14 on February 14, a level it broke through Thursday, the day after the quarterly data were released.
"I think this kind of a classic double bottom tells us this is probably a stock that is too shorted," says Cortes who thinks the market is too negative on the stock. "There is too little optimism and belief in the JC Penney story. I think you want to err on the long side for once."
"I'm not saying necessarily buy this breakout immediately," says Cortes. "But, henceforth, I think the charts are telling you that the paradigm has shifted and that the shorts are going to be the ones who have the burden of proof now, not the longs."
Cortes also agrees with Sanchez on the company being undervalued when factoring its cash and liquidity. As well, he believes its real assets are also undervalued. "You have a giant real estate portfolio," says Cortes. "It's certainly worth multi-billions of dollars. If it ever does come that you need that as the floor, I think you have some cushion there on the real estate side."
To see the full discussion on JC Penney and with Sanchez on the fundamentals and Cortes on the technicals, watch the video above.
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