NEW YORK (TheStreet) -- Shares of J.C. Penney Co. (JCP) are falling, down 5.56% to $6.79 this afternoon, continuing the loss from yesterday after analysts at Goldman Sachs downgraded the company to "sell" from "neutral" citing limited potential for further stock gains.
The firm cut its rating on shares with a 26% downside risk to its $5.50 price target.
Analysts at Goldman Sachs said despite mixed sales results from Black Friday, the retail sector should see a solid holiday season, but companies in the "affordable retail" space may struggle.
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The firm believes the company's under-performance is due to "a combination of e-commerce share gains, a share of wallet shift and weather."
Separately, TheStreet Ratings team rates PENNEY (J C) CO as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate PENNEY (J C) CO (JCP) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 2.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- JCP has underperformed the S&P 500 Index, declining 17.21% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Multiline Retail industry and the overall market, PENNEY (J C) CO's return on equity significantly trails that of both the industry average and the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.0%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- PENNEY (J C) CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PENNEY (J C) CO reported poor results of -$6.07 versus -$4.49 in the prior year. This year, the market expects an improvement in earnings (-$2.58 versus -$6.07).
- You can view the full analysis from the report here: JCP Ratings Report