360 Degrees of J.C. Penney

In this edition of 360 Degrees, RealMoney commentators take a look at J.C. Penney(JCP Quote - Cramer on JCP - Stock Picks), one of the hottest of the suddenly hot retailers.

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The Future of Retail, by James Altucher

When I was a kid, my grandparents used to love taking me out and spending a Sunday afternoon strolling around the local J.C. Penney, the old-fashioned retailer that currently has 1,019 department stores in 49 states.

It's really not so old-fashioned anymore. When James Cash Penney opened his first store in Kemmerer, Wyo., in 1902, he couldn't have had an inkling that 104 years later his company would view its online presence, as opposed to its stores, as the hub of its business. Today, the Internet is probably the furthest thing from people's minds when they think of this stock, yet J.C. Penney will eventually be more of an online company than offline.

Its online store generated $1 billion of its $18.8 billion in sales last year; in passing the $1 billion mark, J.C. Penney pulled ahead of Wal-Mart's online operation in terms of growth. Additionally, the company is equipping all 35,000 cash registers at its stores with access to jcp.com to provide customers with more choices in terms of size, color and other features than might be available in the stores.

Its brick-and-mortar business isn't doing poorly, either. In the quarter that ended July 29, profits soared almost 50% year over year to 73 cents a share, up from 50 cents a share in the year-ago period. The company also guided up to $4.55 a share in earnings for the full year.

Right now, the stock trades for only eight times cash flows, with an enterprise value of $15.9 billion and EBITDA at $2 billion. With its online operation spearheading growth and the company exceeding expectations with a 22% return on equity, it is ripe to get bought out.

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The Store for Everyone, by Jim Cramer

J.C. Penney is the only department store that sells to low-, middle- and high-income people. It also has the best management. Its better-than-expected earnings show that not only is the consumer not dead, he's alive and well and shopping -- at Penney's.

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Take It Slow and Steady, by Alan Farley

J.C. Penney's chart showed bullish characteristics in the second quarter and it looked ready for a breakout to new highs, but the stock couldn't sustain its gains in the sharp downdraft of the broad market selloff. Notice how it rallied above the May peak in early July and then gapped down in a high-volume failure. That selloff continued for several days until it found support in the low $60s. It then moved sideways for three weeks before charging back to the breakdown gap earlier this week.

I don't think we're going to get a fast and furious breakout now. Watch for the stock to make incremental progress over the next few months. It is short-term overbought right now, so look for the recent rally to stall and for the stock to consolidate its recent gains with a shallow pullback. That decline should hold above $65 and set the stage for a rally up to $70, its 2006 high. At that point, it could embark on a slow, steady uptrend into the holiday season.