Deutsche Bank Reiterates "Hold" and PT of $8 on JC Penney
1. We are very concerned with the SSS slowdown to flat in 3Q
2. Margins in 3Q were stronger than expected, but at current levels the clawback of market share will needed for further gains.
3. Notable takeaways from the call include: expectations for traffic to be down YOY in 4Q with higher conversion driving the comp; company is "pleased" with SSS the first 10 days of November...
4. With SSS slowing, tough compares ahead, and no indication of monetizing real estate near-term, we apply 6.5x EV/EBITDA (close to peer multiple) on FY17 discounted back, equating to our $8 price target.
5. Risks include slower than expected SSS or conversely margins improving at a faster than expected pace.
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