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J.C. Penney's Bandwagon Will Crash

Secondly, not much was expected from the fourth-quarter report. As impressive as the $35 million earned in net income, the company benefited from a tax benefit of $270 million. This was tied to gains from J.C. Penny's pension plan.

Tired of punishing new management after Ron Johnson, the Street has always wanted to give J.C. Penney the benefit of the doubt. The slight increase in same-store-sales provided the reason. Management projects same-store sales will rise between 3% to 5% in the first quarter.

But where's the track record in this story to suggest that Penney can deliver positive store sales for all of 2014? With the stock up more than 90% already, investors are risking a lot. And even though gross margin expanded, it's also because the company has been aggressively cutting costs.

Investors are making a mistake to assume that the likes of Wal-Mart (WMT) and Target (TGT) will continue to struggle. Along those lines, is it just a coincidence that J.C. Penney showed "better-than-expected" numbers in the same quarter that Target experienced its data breach?

Clearly, there are other factors at play here. And not all of them are within the company's control. The good news is that the worst is over for J.C. Penney. But don't think management has outlined a strategy to support this new holy grail of prosperity. Certainly not one that merits a 90% stock surge in just 22 days.

At the time of publication, the author held no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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