JC Penney (JCP)

We are downgrading JC Penney (<a href=http://www.zacks.com/stock/quote/jcp>JCP</a>) shares from Hold to Sell. The stock is up about 90% off its March lows. We think the shares have moved too far, too fast, given that the retailer is still several quarters away from seeing a real rebound in its business. <p> Moreover, management is pointing to signs of stabilization in its business, we note that JC Penney&#39;s sales and earnings will experience sever declines in 2009. We previously upgraded the stock on February 8, when it traded around $16. We felt that at that price the stock discounted much of the bad news. <p> However, with the stock trading around $27, we think the stock has substantial downside risk. Our target price is $16, which 20x our fiscal 2010 EPS estimate.

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