J.C. Penney (JCP) reported second-quarter earnings today that fell short of analyst expectations. Shares tumbled by nearly 27% today, and one analyst is calling the stock “worthless.”
“Based on JCP’s updated and lowered guidance, we estimate JCP shares are currently worthless,” Clearview Trading Advisors analyst Rick Snyder wrote in a note to clients. “This is not hyperbole — we entered a price of $0.01 into our model.”
He added that “until I see some evidence that it may recover and improve profitability,” he would maintain his comments.
Earlier today, J.C. Penney reported a net loss of $0.32 per quarter for the quarter and missed on revenue by $30 million. Total net sales decreased 7.5% to $2.76 billion compared to the year before. Furthermore, the company is still looking for a new full-time CEO.
“There is something of a party going on in retail, with consumers spending in a relatively carefree way,” GlobalData managing director Neil Saunders wrote in a note to clients. “However, this is a party to which J.C. Penney was not invited.”
As discussed in the video above, Walmart (WMT) rose more than 9% on Thursday after stellar earnings.
‘Balance sheet is in bad shape’
Snyder warned that investors should stay away.
“The current value EBITDA doesn’t support equity value,” Snyder — referring to Earnings Before Interest, Taxes, Depreciation, and Amortization — told Yahoo Finance. “Sales and margins are declining, the balance sheet is in bad shape, [and] the profitability of J.C. Penney doesn’t support equity.”
In the note, Snyder outlines how J. C. Penney’s debt burden is hampering the company. He also highlighted J.C. Penney’s lease-adjusted leverage, which refers to how many lease obligations (i.e. rent) they owe for their stores. According to a report by Morgan Stanley last year, J.C. Penney has the second-highest lease-adjusted leverage ratios among US retailers.
Snyder noted that J.C. Penney’s financial position reminded him of Pacific Sunwear, a teen apparel retailer that filed for Chapter 11 bankruptcy protection in 2016.
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