Imperial Capital Mary Ross-Gilbert back on October 1st downgraded from $8 to $5 and now she downgraded to $1
Imperial Capital analyst Mary Ross-Gilbert reiterated an Underperform rating on J. C. Penney (NYSE: JCP) and slashed its price target from $8 to $5 based on lower revenue and EBITDA estimates in FY15 as the potential return to profitability may be more protracted in an intensely, competitive and challenging retail climate.
The firm maintained a Buy rating on all bonds maturing beyond 2015 and particularly recommend the longer-dated bonds that trade at a lower dollar price as they believe investors could realize 19-24% annualized returns over the next 1-2 years including current yields of 9-11%. The firm is also maintaining a Buy rating on the $2.25bn senior secured term loan due 5/22/18 at a recent price of 97.5.
Ross-Gilbert comments: "On 9/26/13 after the market close, JCP announced that it commenced an underwritten public offering of 84mn shares of common stock plus a 30-day option to issue an additional 12.6mn shares. On 9/27/13, the shares were priced at $9.65, raising gross proceeds of $810mn; $785.8mn net of fees and expenses, by our estimates. According to discussions with the company, JCP believed it was compelled to raise the funds earlier than planned in light of negative press and analyst reports that raised concerns in the vendor community, in our opinion. We think the company was targeting an "equity raise" following F4Q13, which should deliver positive comparable sales and EBITDA against very easy comparisons to last year’s negative 32% comparable sales decline and negative EBITDA of $278mn."