JCP Still Sucks – Don’t Try to Catch Falling JCPenney Stock

by Alyssa Oursler | September 24, 2013 10:51 am

JCP Still Sucks – Don’t Try to Catch Falling JCPenney Stock

JCPenney 300x191 JCP Still Sucks   Dont Try to Catch Falling JCPenney StockJCPenney (JCP[1]) just keeps on sliding, with yesterday’s 5% haircut putting JCP stock only 2% off its 52-week low of $12.12.

That means JCP stock is an ugly 38% in the red since Jan. 1 – and that your hard-earned investment money can be better spent elsewhere than JCPenney stock.

JCP is a sell if you own it, and new money has a host of better investing options than JCPenney stock right now.

More Money Means More Problems for JCP

JCPenney stock isn’t going to be saved by recent chatter that the struggling department store is looking to raise more money, either.

As Bloomberg reported[2] on Friday, JCPenney is being pressure by shareholders to take advantage of cheap financing … but JCP has already borrowed more than $3 billion this year, including $2.25 billion from Goldman Sachs (GS[3]), and the retail stock doesn’t an have immediate cash need.

What JCP stock does have, though, is a whopping $9 billion in liabilities on its balance sheet already, including $5.8 billion in debt. Those respective numbers for JCPenney are more than triple and double its ever-shrinking market cap.

The potential capital raise could also be a sign that third-quarter traffic and JCPenney same-store sales haven’t improved much, according to UBS analysts[4] Michael Binetti and Steven Strycula.

JCP Stock Just Keeps Getting Worse

JCP stock could easily go from bad to worse again if those trends haven’t improved — which seems likely considering even healthy retailers like Macy’s (M[5]) and Walmart (WMT[6]) have been struggling[7].

In the most recent quarter[8], remember, JCPenney posted a 12% slide in net sales and same-store sales, which translated to an adjusted net loss of $2.16 per share — almost twice as wide as the expected loss of $1.06, and 70% of the then-loss expected for the entire year.

Analysts have since lowered their hopes for the embattled retail stock, though, and are now expecting JCPenney to lose $6.13 per share for the full-year. That’s nearly twice as wide as the loss that was expected three months ago.

No wonder every time this retail stock seems to have finally hit rock bottom, things go from bad to worse. Sure, JCPenney stock has posted a few short-lived runs, but has followed each on by losing all its gains and them some. Consider that:

Sure, if you had timed JC Penney stock perfectly, you might have made a sweet buck here or there. But the odds of that happening are slim, while the odds of getting burned by JCPenney stock are much higher.

Heck, even the smart money betting on JCP stock has thrown in the towel[9]. Bill Ackman’s Pershing Square and Vornado Realty Trust (VNO[10]) have both taken their losses and headed for the exit in JC Penney.

You should follow their lead. Betting on JCPenney stock is like trying to catch a falling knife, and there are plenty of better places for your money.

As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.

Endnotes:
  1. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  2. As Bloomberg reported: http://www.bloomberg.com/news/2013-09-20/j-c-penney-said-in-talks-to-raise-more-money-for-turnaround-1-.html
  3. GS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GS
  4. according to UBS analysts: http://blogs.barrons.com/stockstowatchtoday/2013/09/23/j-c-penney-falls-4-on-money-raise-concerns/
  5. M: http://studio-5.financialcontent.com/investplace/quote?Symbol=M
  6. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  7. have been struggling: http://investorplace.com/2013/08/macys-earnings-signal-trouble-for-retail-stocks/
  8. In the most recent quarter: http://investorplace.com/2013/08/jcpenney-earnings-jcp/
  9. has thrown in the towel: http://investorplace.com/2013/08/bill-ackman-jcpenney-jcp-towel/
  10. VNO: http://studio-5.financialcontent.com/investplace/quote?Symbol=VNO

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