Deutsche Bank lowered its price target of $6.00 (from $12.00)
On Tuesday morning, Deutsche Bank maintained an Hold rating on J. C. Penney (NYSE: JCP) and lowered its price target of $6.00 (from $12.00). Analyst Paul Trussell raised questions about the company's dwindling cash position.
"Specifically, we are currently modeling JCP SSS to turn positive in 4Q13, up 3% YOY which we expect to continue throughout FY14. With capital expenditures on only $300 million in FY14, we look for an ending cash balance of approximately $1.4 billion in cash," said Trussell.
"We look for EBITDA to turn positive in FY15, although with estimated capital expenditures of $450 million, cash continues to burn. With sensitivity of 100 bps of SSS ranging from $20-$45 million in EBITDA and 100 bps of GPM ~$125 million in EBITDA, we highlight EBITDA and cash balance sensitivity on P&L estimates better and worse than our current forecast. In terms of risks, sustained comp and GPM declines would lead to a quick dwindling of the current cash balance, potentially leading vendors to opt out of Fall 2014 orders," he said.