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Why J.C. Penney Stock Popped Today

Joe Tenebruso, The Motley Fool

What happened

Shares of J.C. Penney (NYSE: JCP) jumped nearly 14% on Thursday, following share purchases by several of the company's executives.

So what

On Aug. 26, CEO Jill Soltau bought 500,000 shares of J.C. Penney stock at an average price of $0.56. Following the transaction, Soltau owned a total of more than 9.4 million shares of the company's stock, which is currently valued at nearly $6.9 million. 

Notably, Chief Merchant Michelle Wlazlo, Chief Customer Officer Shawn Gensch, and Board Director Javier Teruel also purchased J.C. Penney stock in recent days.

A person pushing a keyboard button labeled buy.

Image source: Getty Images.

Now what

While company insiders can sell for a host of reasons, including diversifying their investment portfolios and exchanging stock compensation for money, it's widely believed that they buy for only one reason: They think the price is going to go up.

So investors are likely viewing stock purchases by Soltau and her fellow executives as a sign that J.C. Penney may be about to turn the corner. But while some signs suggest that the struggling retailer's turnaround strategy may be taking hold, others -- such as its shrinking customer base and cash reserves -- are likely to make it difficult for the company to recover -- so much so, that some investors believe it's only a matter of time before J.C. Penney succumbs to its massive debt load and is forced into bankruptcy.

As such, J.C. Penney remains a high-risk investment, despite the recent purchases by Soltau and others. Moreover, there are better stocks to buy today.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com