Following an initial rush of enthusiasm after the company reported fourth-quarter results in late February, shares of J.C. Penney Co. Inc. (NYSE: JCP) have traded in a band between about $7.25 and $9.75, with the majority of the time being spent at around $9 a share. That is a lot better than its 12-month low (also set in February) of $4.90 a share, but it can hardly be characterized as a recovery.

The share price almost doubled after the company reported first-quarter results, but the price hit a peak at nearly $9.75 and has dropped back to around the $9 level. That is more than 50% below the 52-week high of $18.90. That’s not a recovery, that is merely surviving on life support.

J.C. Penney’s management and the stock’s bulls believe that not failing is the same as succeeding. Same-store sales have indeed risen year-over-year in each of the past two quarters, but the starting point was so low that failing to improve would have been the end of the company. Just because J.C. Penney could rise from the deck before being counted out is not a reason to declare victory.

Following the first quarter’s earnings report, analysts at Wells Fargo downgraded the stock to Underperform with a price target of $5. The analysts were unsparing:

JC Penney’s high level of debt likely leaves very little value left for equity holders, a concept which we believe is extremely important to understand for those that are intrigued by slightly better comps in Q1. Considering this dynamic, we believe the stock is overvalued at current levels …

Analysts at Morgan Stanley had this to say about the first quarter results:

JC Penney’s 1Q was better than our/consensus estimates but management’s free cash flow neutral guidance appears optimistic. … JC Penney is moving toward a legacy strategy that has proven unsuccessful before.

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J.C. Penney cannot compete with higher-end stores like Macy’s Inc. (NYSE: M), and price-sensitive customers are headed for Target Corp. (NYSE: TGT) or Wal-Mart Stores Inc. (NYSE: WMT). J.C. Penney’s long-time middle-class customers have all but disappeared following the recession, victims of unemployment or stagnant wages.

Just bringing back sales and promotions will not do the job in the long run. In addition to the brick-and-mortar competition, there is also the retail juggernaut that is Amazon.com Inc. (NASDAQ: AMZN).

J.C. Penney is being squeezed, and how the company chose to escape was to revert back to a strategy that failed years ago. Doing the same thing over and over again, all the time expecting a different result, is one definition of insanity, according to Einstein. He was a very smart guy.

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