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J.C. Penney's friend list grows by one

March 14, 2013: 11:44 AM ET

Brick-and-mortar JC Penney is in bad shape, but those bricks could be valuable.

J.C. Penney has few friends on Wall Street, but Thursday, the troubled retailer gained one more.

BTIG analyst William Frohnhoefer issued a "buy" rating, making him one of the few analysts to recommend purchasing J.C. Penney's stock.

Frohnhoefer also set a price target of $22 per share. That's more than 40% higher from where J.C. Penney's (JCP) stock is currently trading. Early Thursday, shares slid 1% to $15.53.

The call is a rare bit of good news for J.C. Penney, which has had its share price cut in half over the past year.

Shares have fallen more than 50% amid declining sales.

Frohnhoefer said the stock "represents an option" on the company's turnaround plan that will pay off when the transformation is completed.

Frohnhoefer acknowledged that J.C. Penney has "suffered a number of operating reversals and negative headlines in recent quarters," but said investors are undervaluing the retailer's assets.

The company's traditional retail business is "wounded but salvageable," he said, adding that the "new" retail business, in which J.C. Penney shops are transformed into a collection of "mini-stores" dedicated to brands like Levi's and Liz Claiborne, has potential.

In addition, Frohnhoefer said J.C. Penney's real estate portfolio, worth an estimated $3 billion, is "an asset which we believe can be accessed to the benefit of equity investors."

J.C. Penney has seen sales and earnings plunge in recent years as consumers increasingly favor online retailers.

CEO Ron Johnson, the man behind Apple's successful retail chain, has been struggling to turn the 111-year old company around since he took the helm in 2011.

In a bid to lure shoppers, J.C. Penney changed its pricing last year, introducing a three-tiered structure that Johnson later acknowledged was confusing for many consumers.

Related: Martha Stewart, J.C. Penney and Macy's ordered to mediation

In the fourth quarter, J.C. Penney suffered a loss of $427 million, or $1.95 a share, excluding certain charges. Sales in the quarter fell 28% to $3.88 billion.

The dismal performance capped a difficult year for J.C. Penney and raised questions about Johnson's strategy.

Citigroup analyst Deborah Weinswig downgraded J.C. Penney stock last week to neutral from buy after meeting with the company's management.

Weinswig said in her report that Citi still supports J.C. Penney's "long-term vision," but she was skeptical about the company's ability to revive sales.

She added that J.C. Penney shares could stabilize if the company decides to sell assets, entertain buyout offers or oust senior executives.

Despite the hard times, J.C. Penney still has one influential supporter on Wall Street.

Hedge fund manager Bill Ackman is the largest investor in J.C. Penney and has been a vocal supporter of Johnson.

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Ben Rooney
Ben Rooney
Staff writer, CNNMoney

Ben Rooney is a staff writer for CNNMoney. He covers the European debt crisis and other international finance stories, in addition to writing about stocks, bonds, investing and other Wall Street-related news.

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