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 (OTC: SHLDQ) may be forced into liquidation, J C Penney Penney Company Inc. (NYSE: 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