UBS Still Selling JCPenney, Stock Jumps 3.75%

UBS' Michael Binetti maintained a Sell rating on J C Penney Company Inc JCP, while raising the price target from $7 to $8.

The company reported robust 4Q results, despite several headwinds, with the EBITDA meaningfully beating expectations and same store sales rising more than expected.

Binetti noted that the EBITDA beat was driven by a retroactive accounting change in pension accounting, while gross margins came in below expectations.

JCPenney guided to 2016 EBITDA of $1 billion, ahead of the estimate and the consensus. However, the analyst noted that "this guidance is contingent on a sale/leaseback of its Texas HQ. If the company can successfully close this transaction in year, JCP hopes it would fund a paydown of $400 million - $500 million in debt in '16."

Related Link: JCPenney Stock Is Now A Better Bet Than Its Competitors

Despite strong same-store sales results for 4Q Binetti believes that there could be meaningful risks to the company's turnaround story, including weak mall traffic, ongoing U.S. apparel CPI deflation, among others.

The analyst believes that if the company's sales were to slow, the stock reaction could be significant.

The FY16 EBITDA estimate has been raised from $910 million to $1 billion.

At the time of this publication, JCPenney was up 3.75 percent on the day at $9.95.