The guidance on January 5 was victim of soft sales in the first two months of the quarter generating slightly negative same-store sales for its fourth quarter with non-GAAP earnings coming in a range of $0.65 to $0.70 earnings per share.
Our thesis was simple” For new investors, this is not a fourth quarter story. This is not a story of guidance for the current quarter, and it may not even be a story of strong results in 2012… Ron Johnson is set to transform the look and feel of this company entirely.”
Penney’s shares at the time of our call were down over 6% on that day at $32.75. The problem now, if there is a problem, is that the new concept unveiling and the leaner retail worker structure has met a guidance presentation all in one week.
A gain of 15% to $39.48 on Thursday now has shares up 20%. Why is this a problem? The consensus analyst target is down under $34.00 and the 52-week trading range is $23.44 to $41.00. It was known that Ron Johnson was going to use his Apple magic to transform the company. It was known that he was going to have the presentations.
A 20% gain in three weeks is generally a gift no matter how you cut it. Even if analysts raise their price target objectives substantially, at a minimum we would only look to enter on a pullback now. Taking at least some profit at this point would not hurt anyone even if it is only on part of the position.
JON C. OGG
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