“It’s all inside” at JC Penney Company Inc (NYSE:JCP), and for JCP stock investors that has been less than good news for a very long time. But could the department store operator turn things around and put a fresh face on its business prospects? Let’s take a look and offer a limited-risk options-based strategy based on what’s what we’re seeing off and on the price chart.
It has been an awful few years for JCP stock. That’s not exactly news to anyone that’s driven by JCPenney — and not to mention the very few individuals that have actually stepped foot inside one of the once-great, American retailers.
There have probably been some missteps along the way that haven’t helped, but it’s also well past the Bob Dylan “the times they are a-changin” inflection point. The way consumers shop is largely owned by Amazon.com, Inc. (NASDAQ:AMZN), Wal-Mart Stores Inc (NYSE:WMT) and Target Corporation (NYSE:TGT).
There’s no judgement here, that’s just the way it is.
If I was to try and put a fresh face on JCP stock it might be that despite the crime scene tape surrounding America’s malls in recent years, JCPenney has managed since 2015 to be free-cash-flow positive. It’s something, right?
JCPenney also has a new face in ABC’s Black-ish star Tracee Ellis Ross who is bringing a fresh design collection to the retailer. The company is even hiring 120,000 seasonal personnel for the holidays. That’s something too, right? It is, but I’m wary it’s just not enough to stem the tide.
Bottom-line, with the irony of JCPenney’s once-catchy “It’s all inside” motto now a continued inventory/sales albatross, weak operating margins and profits a non-starter at this time, I’d be wary of considering JCP stock as an attractive turnaround play.
JCP Stock Monthly Chart
Click to Enlarge
Technically speaking and while it has been all inside at JCPenney’s, it’s been all downhill for JCP stock. Personally, I like to root for the underdog. Unfortunately, I can’t say there’s sufficient evidence on the monthly price chart to believe the end of this punishing trend is nearby.
That’s not to say JCP can’t bounce. In fact, I’d be surprised if shares don’t “jump” 5%, 10% or maybe even 15% sometime soon. More importantly, in anticipating JCPenney will encounter an even tougher holiday selling season and reaffirm a deathly looking trend off and on the price chart; the trend is your friend if you’re bearish.
JCP Stock Long Put Strategy
If I was to shop in JCP stock for a strategy and given I simply don’t see a good outcome for the retailer, I’d purchase the May $2.50 put for 34 cents.
First, with shares at $3.39, risk is limited to 10% of JCP stock. That’s attractive in the event my worries prove ill-founded.
Second, this longer-dated put offers the opportunity to build in value against the backdrop of a bearish narrative that includes a couple earnings cycles and of course, a likely hapless Amazon show this holiday season.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits and feel free to click here to learn more about how to design better positions using options!
