Deutsche Bank Raises Target On JCPenney To $14, Reiterates Buy

Deutsche Bank’s Paul Trussell reiterated a Buy rating on J C Penney Company Inc JCP, while raising the price target from $12 to $14.

‘Sky Rocketing’ Stock

The stock has surged 73.4 percent year to date, although “to what extent that move is due a short cover rally or from the fundamental story gaining traction is still very much a debate,” Trussell pointed out.

However, the company posted better than expected 4Q15 results, and the out-year expectations have accordingly moved up.

Related Link: UBS Still Selling JCPenney, Stock Jumps 3.75%

Missing The Big Picture

Trussell believes that JCPenney “remains a heavily shorted name,” with investors believes that the company has been “cutting expenses too deep,” which would lead to an adverse impact on same store sales.

The market also appears to believe that the company is not spending enough on IT and its stores, which has led to it lagging its peers.

Trussell also mentioned that there is a perception that the company is “running out of steam on the top-line as compares toughen” and that it is “structurally impaired” as a department store.

Despite efforts being made by the new management team, investors appear to believe that JCPenney would eventually start losing market share to peers.

“We believe this view is missing the big picture,” Trussell pointed out, while stating that “JCP is taking market share from peers which likely include other department stores as well as specialty apparel players, many of whom are closing doors at an accelerated pace.”

The FY17 EBITDA estimate has been raised from $1.18 billion to $1.27 billion.