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Will New CEO Boost JC Penney?

10/19/2015 8:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Our latest new recommendation is one of the few retail stores which has yet to participate in the consumer spending binge of the past couple of years, suggests Mark Skousen,, editor of Fast Money Alert.

JC Penney Co. (JCP) has lingered under $10 a share for some time. But that’s about to change under the company’s new CEO, Marvin Ellison.

He is doing all he can to spruce up JC Penney with new lines of clothing and products (including a Disney clothing line for children), innovative online shopping, and significant cost-cutting strategies.

The plan is working. Revenues are up 3% to $12.4 billion and earnings before taxes and depreciation reached $500 million. 

The price:earnings to growth (PEG) ratio is 0.28 (anything less than 1 is considered excellent). It currently has $1 billion in cash, which is plenty to finance its $5 billion in long-term debt.

Ellison recently announced that JC Penney would cut its $5 billion pension obligation up to about a third through a lump-sum offer to participants, in addition to a deal with Prudential.

Also, stock analyst firm Stern Agee upgraded J C Penney to a buy, with a $13 price target. The Street also thinks the retailer has 30% upside potential.

Technically, the stock tends to do well in the fall buying period, especially during October.

Let’s buy JC Penney at market today and set a protective stop of $8 a share. For those more adventuresome, consider buying the February $11 calls.

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