Buckingham Research Upgrades JC Penney, Sees Path To $12 On 'Accelerating' Comps

In a report published Wednesday, The Buckingham Research Group analyst David Glick upgraded shares of J C Penney Company Inc JCP to Buy from Neutral with a price target raised to $12 from a previous $9.

According to Glick, the upgrade centers around the belief that JC Penney will see its comp accelerate in the bottom half of 2015 as its center core, omni-channel and Home initiatives "start to bear fruit." As such, the analyst expressed "increased confidence" the company will achieve its $1.2 billion EBITDA target in 2017.

"Even with fiscal 2015's increased comp sales guidance (four to five percent), we think J.C. Penney's sales initiatives are gaining momentum and believe this guidance is achievable," Glick wrote. "Moreover, we believe new CEO Marvin Ellison's leadership ability, fresh perspective, and intense focus on returning J.C. Penney to profitability could yield multiple pathways and levers to achieve this EBITDA target."

Glick continued that that JC Penney's path towards $1.2 billion EBITDA could also be achieved by continued gross margin improvements as a 38 percent rate is attainable by 2017 and actually exceeds the company's own 36.5 percent guidance. In addition, the company could also achieve its EBITDA metric by continuing to reduce its SG&A levels.

Bottom line, Glick stated that owning shares of JC Penney offers "one of the most compelling" risk to reward profiles among his coverage. As such, the analyst is recommending investors either start a position or add to an already existing position as "we see the next few quarters as key positive catalysts."