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JCPenney's (JCP) shares have been rudely treated since reporting more than 5% same store sales declines in October and December, but I'm nevertheless reiterating my buy rating for the company's shares, first recommended on April 13, 2009, at a price of $26.52. Here's why:JCPenney has adroitly adjusted to the U.S.'s "frugal consumer" era. JCP has effectively aligned product quality/style with its target demographic, and also prudently and tactfully invested in new brands.
Meanwhile, good inventory management and expense controls have aided the bottom line. Modest new store expansion plans for FY2010 and FY2011 are also consistent with a business model that's survived amid the retail sector's rout. In other words, JCP will be a retail sector survivor and able to hold its own for what undoubtedly will be scarce consumer dollars in the years ahead. The First Call FY2010/FY2011 EPS estimates for JCP are $1.05 to $1.48.
Technically, as noted JCP has swooned about $11 to $26 from a 2009 high of $37 on the lower, monthly sales totals, and has remained below the key, 50-day moving average. The calculation here is that support will hold in the $22-24 range. Hence, view the pull-back as a Buy opportunity.
Finally, the Sell/Stop Loss has been raised to $17 from $12 to protect against any unexpected developments.
2010 Outlook: JCPenney is a long-term play. Don't Buy JCP if you're looking to close your position by the end of 2010, as the one-year risk/return is not favorable.
Stock Analysis: JCPenney is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in JCP now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your JCP position before March 2010. Revised Sell/Stop Loss if you bought shares in this company: $17.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Technically, as noted JCP has swooned about $11 to $26 from a 2009 high of $37 on the lower, monthly sales totals, and has remained below the key, 50-day moving average. The calculation here is that support will hold in the $22-24 range. Hence, view the pull-back as a Buy opportunity.
Finally, the Sell/Stop Loss has been raised to $17 from $12 to protect against any unexpected developments.
2010 Outlook: JCPenney is a long-term play. Don't Buy JCP if you're looking to close your position by the end of 2010, as the one-year risk/return is not favorable.
Stock Analysis: JCPenney is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in JCP now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your JCP position before March 2010. Revised Sell/Stop Loss if you bought shares in this company: $17.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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