by Robert Martin | October 23, 2013 5:58 am
Shares of JCPenney (JCP) fell below the $7 mark this week, bringing 1-month losses to around 50% and 12-month losses to 75%. That’s the lowest level JCP stock has seen in 33 years.
JCPenney stock did manage to regain a sliver of recent losses yesterday, but that still wasn’t enough to send shares of JCP back over the $7 mark, much less bring them back to the 20-day moving average just over $8. JCPenney stock closed up 2% at $6.55 for the day.
Fun fact: That makes the share price less than the amount of cash JCPenney held per share as of the end of the second quarter.
The balance sheet could have changed slightly since then — something we will find out when third-quarter JCPenney earnings are released next month, on Nov. 19. But it seems likely that there will still be little value, if any, in shares of JCP stock beyond the company’s pile of cash.
Besides, debt per share for JCP was around four times that cash per share as of the the second quarter’s end.
That’s an ugly picture for falling JCPenney stock, and just part of the growing pile of reasons investors are best advised to stay away.
If you’re still not convinced an investment in JCP stock is too big of a risk, the red flags don’t end there.
First of all, JCP stock continued its downtrend this week because Imperial Capital analyst Mary Ross-Gilbert reiterated her “underperform rating” and slashed her price target to just $1. That $1 floor was cited by a Citi analysts as the liquidation value last month as well.
While Ross-Gilbert pointed to the possibility of bankruptcy as the reason for more JCP downside, there are plenty of other headwinds for JCPenney stock.
Brian Sozzi, CEO & Chief Equities Strategist at Belus Capital Advisors recently said that the retailer needs a historic holiday season to survive, mentioning the aforementioned huge pile of bills to pay. That type of holiday season sure doesn’t look to be in the cards for JCP.
Deutsche Bank (DB) analysts, for example, expect the department store space overall to struggle this holiday season in the face of declining mall traffic and overall spending that is lackluster. That means they expect stronger stores like Macy’s (M) and Nordstrom (JWN) to post even lower earnings, and flailing JCPenney to post an even wider loss.
That’s hardly what JCPenney needs — especially considering holiday sales fell 30% last year under the reign of Ron Johnson.
And that means there’s a pretty good chance that JCP stock will continue its never-ending slide. Besides, on the off chance there is a substantial rebound, it’s almost guaranteed that bottom-fishing investors aren’t going to time it right.
The bottom line: Stay away from sinking JCPenney stock. Everytime it seems like the stock can’t fall any further, it doesn. And there’s simply no reason trying to time a bottom in a stock with little value and little hope at a turnaround anyways.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
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