Can J.C. Penney close its way to prosperity? JPMorgan analyst Matthew Boss seems to think so -- and it looks like the market agrees.
Shares of J.C. Penney (JCP) rose more than 5% Monday and are on track to close at their highest price since last September. The stock is now up nearly 20% in 2014.
Who's the Boss? The catalyst for Monday's move was a classic case of Wall Street celebrating what appears to be bad news. JPMorgan's Boss still has a "neutral" rating on the stock.
And his price target for the end of 2015 is $11 -- just 3% higher than current levels.
Boss was mainly optimistic about the possibility of JCP increasing its profits by getting rid of a LOT more stores than the 33 it already announced it was closing back in January.
Boss estimates that if the retailer shuttered 300 of its nearly 1,100 stores, that could increase earnings before interest, depreciation and amortization by $450 million. And that could justify a stock price of more than $20 a share.
JCP: Just Can't Profit. Let's be blunt. JCP is still a mess.
And while new-ish CEO Myron Ullman is doing his best to repair the damage created by his predecessor Ron Johnson -- who was actually lured away from Apple (AAPL) to replace Ullman in the first place -- he has a long way to go.
Johnson tried to make JCP cool. Like Apple. But nobody shopped at JCP because they thought the retailer was at the forefront of the latest fashion trends. They just wanted cheap pairs of St. John's Bay jeans. That's not the worst thing in the world.
Yes, Ullman is getting rid of some of the store-within-a-store concepts that Johnson created. Ullman is also bringing back promotions and coupons, two things that Johnson curiously viewed as the equivalent of a four-letter curse word.
Sales are even growing again at J.C. Penney. That's a good thing. But it's a slow pace.
Analysts are forecasting a 4.6% increase in annual revenue this year to $12.4 billion. That is nearly 30% lower than what the retailer reported in 2012.
Finally, it's hard to get excited about JCP just because it might cut costs.
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
"When it fits, you feel it," is the strange (and slightly dirty) new slogan for J.C. Penney.
But is the struggling retailer's stock finally a good fit for your portfolio? Shares certainly are feeling the love MOREPaul R. La Monica - May 13, 2014 12:39 PM ET
Don't look now, but J.C. Penney shares are on fire lately.
The stock has nearly doubled since hitting a multi-decade low below $5 in early February. And it was up nearly 9% Tuesday to its highest levels since the end of last year.
Why the optimism? Citigroup analyst Oliver Chen upgraded J.C. Penney (JCP) on Tuesday to a "buy" and called the retailer an "American comeback story." Chen said he's a believer MOREPatrick M. Sheridan - Mar 11, 2014 12:26 PM ET
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