The Contrarian Case For Buying J.C. Penney Stock

In a report published Monday, Piper Jaffray analyst Neely J.N. Tamminga maintained an Overweight rating on

, while raising the price target from $15 to $17. JC Penney reported robust 2Q results, with better-than-expected EBITDA of $115 million. The comps for the quarter, at 4.1 percent, were in-line with the Piper Jaffray estimate. The company raised its EBITDA guidance for the full year from $600 million to $620 million and now expects to reduce its SG&A by $120 million, instead of the earlier guided $100 million. JC Penney aims at achieving $1.2 billion in EBITDA by 2017. Tamminga said that Omnichannel was expected to be a key focus area for the company over the next few years. JC Penney's new CEO Mr. Marvin Ellison had been part of a similar process at Home Depot. "[W]e believe he will be an integral part of the process as JCP begins to leverage its existing 1,000+ stores as distribution points and seamlessly integrate its on-line and in-store experiences for customers," the Piper Jaffray report added. The company expects the current improvement in its performance to continue over the next few years with a "solid ramp up in the second half of the next year." The EPS estimates for FY16 and FY17 have been revised from ($1.37) to ($1.32) and from ($0.42) to ($0.32), respectively.