J.C. Penney shares rise following upgrade

Shares of J.C. Penney Co. rose on Thursday after an analyst upgraded the department store operator, citing improving retail trends.

Shares rose $1.75, or 6.6 percent, to $28.35 during afternoon trading as the broader market climbed. The stock has traded between $13.71 and $44.20 during the past year.

JPMorgan analyst Charles Grom wrote in a note to investors that department store stocks have fallen out of favor, but that could present a buying opportunity, particularly in J.C. Penney's case. He raised his rating on J.C. Penney to "Overweight" from "Neutral" and lifted his share price target to $33 from $28.

Department stores have suffered amid the consumer spending pullback as consumers trade down to discounters and hold off for sales.

But Grom said J.C. Penney is in a unique position to benefit from some improving retail trends, including lower apparel input costs, fewer markdowns due to tighter inventory, and stabilization in the home category which accounts for about 21 percent of J.C. Penney's product mix.

"In addition, with year-to-date sales continuing to trend ahead of the company's original plan, led by women's apparel outperformance, we believe J.C. Penney remains on pace to beat current Street estimates," he added.

He added that J.C. Penney's stock price has sunk 18 percent since early May.

"We believe today's entry price is attractive," Grom said.