JCPenney Becomes A Penny Stock

Another one of America’s former retail stalwarts appears to be on the brink of disaster. In the same week Sears Holding Corp SHLDQ may be forced into liquidation, J C Penney Penney Company Inc. JCP officially dipped into penny stock territory for the first time.

JCPenney shares traded as low as low as 92 cents on Thursday before closing the session under $1 for the first time. Despite a 3 percent move Friday, the stock appears to be having trouble getting back above the psychological $1 mark.

Following Sears’ Footsteps?

This week marks the first time since the company went public in 1929 that JCPenney’s shares are in penny stock territory. The $1 level is important for public companies because of the NYSE’s minimum share price requirement for stocks to keep a stable price above $1. JCPenney will either need to get back above the $1 level by giving investors a reason to buy the stock or it will run the risk of eventually being forced to perform a reverse stock split to maintain its listing.

Sears has until the end of the day Friday to accept a $4.6 billion buyout by CEO Eddie Lampert or it will likely be broken up and forced to liquidate its assets. In the third quarter, JCPenney reported a $151 million net loss and a 5.4 percent decline in sales. The company already has $4 billion in debt, and and aggressive cost-cutting efforts have given investors little reason for optimism up to this point. In fact, JCPenney appears to be following a similar trajectory as Sears.

Technical Take

Friday’s bounce has provided at least a glint of optimism that maybe the stock could find at least near-term support in the 92-cent range. However, each new low is uncharted territory for the stock, with very little possible technical support. Even the mid-90s support level is simply the low end of a bearish channel that JCPenney stock has been trading in throughout 2018.

Unless the stock can break out to the upside above its 50-day simple moving average at $1.38 and above the ceiling of the channel at around $1.50, there’s no technical sign the stock is headed anywhere but lower in the long-term.

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Photo credit: Miosotis Jade (Own work), via Wikimedia Commons