JCP Keeps Crumbling After Citi Says JCPenney Stock Worth $1

by Alyssa Oursler | September 26, 2013 9:39 am

JCPenney 300x191 JCP Keeps Crumbling After Citi Says JCPenney Stock Worth $1JCPenney (JCP[1]) shareholders woke to even more losses this morning, with JCP stock opening in the single digits thanks to initial losses around 4%.

The catalyst for the continued damage to JCP was a note from Citi[2] saying the flailing department store has a total liquidation value of $324 million. For JCPenney stock, that translates to a price of $1 per share — around 90% less than its Wednesday closing price!

Shareholders didn’t waste time looking for the exits — hardly surprising considering that JCPenney stock got pounded Wednesday, too, suffering a brutal 15% one-day haircut.

So with JCPenney stock in apparent free fall, it should be clear now that the only thing you should be doing with Penney is avoiding it at all costs.

JCP Just Can’t Find a Bottom

As I said before JCP imploded[3] — well, imploded even more, I guess — there are far better places for your money than in JCPenney stock. Just consider the broader direction of Penney:

JCP’s downward momentum — spurred by failed CEO Ron Johnson’s actions to eliminate sales — just keeps building, even with discounts back in action and Johnson kicked to the curb. The latest string of bad news has included liquidity concerns from Goldman Sachs[4] and reports that the retailer has a weak back-to-school season.

No wonder Bill Ackman of Pershing Square — once a Johnson and JCP cheerleader — and Vornado Realty Trust (VNO[5]) have both cashed in their Penney chips.

Citi’s new cautionary note — which also included a lowered price target on JCPenney stock — just adds to a pile of reasons to stay away. According to MarketWatch, Citi analysts led by Deborah Weinswig wrote:

“The turnaround is taking longer than we anticipated, and we are concerned about a softening macro environment combined with deteriorating vendor relationships (due to weak volumes and growing anxiety about on-time payments during and after holiday).”

Of course, much of this is hardly news. The slow turnaround was laid bare when JCP reported a loss twice as wide as analysts were expecting in the most recent quarter, as JCPenney revenues and same-store sales that each fell 12%. And the weak macro environment has been pointed out by stalwart retailers including Macy’s (M[6]) and Walmart (WMT[7]).

But some investors must have thought the worst was over for JCP — that JCPenney stock simply couldn’t fall even further.

Instead, Penney just can’t seem to find a bottom.

All but the quickest of traders should stay away from JCP. Even if JCPenney sees some short-term recoveries, trying to time them is a fool’s game. Skip the bottom fishing, and find a stock that’s more stable.

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

Endnotes:
  1. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  2. a note from Citi: http://www.marketwatch.com/story/jc-penney-shares-plunge-floor-is-1-citi-2013-09-26?link=MW_latest_news
  3. said before JCP imploded: http://investorplace.com/2013/09/jcp-jcpenney-stock/
  4. liquidity concerns from Goldman Sachs: http://www.bloomberg.com/news/2013-09-25/j-c-penney-plummets-as-goldman-raises-liquidity-concerns.html
  5. VNO: http://studio-5.financialcontent.com/investplace/quote?Symbol=VNO
  6. M: http://studio-5.financialcontent.com/investplace/quote?Symbol=M
  7. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT

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