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J.C. Penney: 'American comeback story?'

March 11, 2014: 12:26 PM ET
Investors love the back-to-basics approach for J.C. Penney. Can the rebound last?

Investors love the back-to-basics approach from J.C. Penney. Can the rebound last?

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 in the company's turnaround plan, a back to basics approach focusing on private-branded merchandise that J.C. Penney is best known for.

The brighter outlook comes after a rough few years.  Sales went into a tailspin under former CEO Ron Johnson, who was brought in from Apple (AAPL) in 2011. Johnson started the company on a radical new path that eliminated the discounts that core J.C. Penney customers had come to rely on.

But his strategy failed. Johnson was fired last year and the company brought back former CEO Myron "Mike" Ullman to lead J.C. Penney.

Ullman's restructuring plan seems to have stopped the bleeding for now. The company's recent stock surge began after J.C. Penney announced late last month that same-store sales rose 2% during the fourth quarter. Online sales were up 26% from a year ago. Those are both very promising signs.

Related: J.C. Penney soars on strong sales

But investors may still have good reason to be cautious. Chen points out that fears remain about the company's liquidity.

Still, Chen feels that these worries are "overdone" and that the company's new strategy should lead to improved sales and profit margins and a bigger cash position for the company. In fact, Chen now has a price target of $11.00 on the stock, up another 20% from current levels.

J.C. Penney introduced a new slogan during the Olympics: "When it fits, you feel it." And while that has drawn some guffaws from the peanut gallery on Twitter, investors clearly feel that Ullman is the right fit for the company.

  • Boo! J.C. Penney is a scary stock

    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.

    Want to really freak out a trader this Halloween? Go dressed as former J.C. Penney (JCP) CEO Ron Johnson. Or former board member/big shareholder Bill Ackman. Aaaagggh!

    J.C. Penney's stock performance this year is infinitely more MORE

    - Oct 31, 2013 1:27 PM ET
  • J.C. Penney scores $1.75 billion loan from Goldman Sachs

    Wall Street has been taking a second look at J.C. Penney in the weeks since controversial CEO Ron Johnson stepped down.

    J.C. Penney said Monday that it secured a $1.75 billion loan from Goldman Sachs (GS). The announcement confirms reports late last week that that the retailer was nearing a financing deal with Goldman.

    Shares of J.C. Penney (JCP) rose more than 4% Monday. The stock gained 9% last week as investors welcomed MORE

    - Apr 29, 2013 12:25 PM ET
  • J.C. Penney surges as stocks slump. Huh?

    The market slid Friday after a terrible jobs report. Retail stocks were not spared. The SPDR S&P Retail exchange-traded fund (XRT) was down nearly 1%.

    It makes sense. If the job market is going into another spring swoon, then consumers probably will spend less at the mall. So why on Earth were shares of J.C. Penney (JCP) up 4%?

    J.C. Penney's problems are well-known at this point. The department store chain's sales MORE

    - Apr 5, 2013 1:10 PM ET
  • J.C. Penney's friend list grows by one

    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 MORE

    - Mar 14, 2013 11:44 AM ET
  • J.C. Penney CEO impresses despite loss

    On paper, it was a really tough quarter for J.C. Penney (JCP), but CEO Ron Johnson was successful in convincing investors that the company is moving in the right direction.

    The retailer, which launched an overhauled pricing strategy in February, lost $147 million during the second quarter, nearly three times more than analysts were expecting. Sales were extremely weak, falling 23% overall from a year earlier, and same store sales, a key gauge MORE

    - Aug 10, 2012 12:57 PM ET
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