An analyst said Monday that hedge fund Pershing Square Capital Management may have more confidence in retailer J.C. Penney Co. because the department store operator is set to usher in a new CEO in November.
On Friday J.C. Penney disclosed in a regulatory filing that Pershing Square _ headed by William Ackman _ will be allowed to increase its stake in the company to 26.1 percent from 18.3 percent. The deal also calls for Pershing's voting shares to be cut to 15 percent from 18.3 percent.
Deborah Weinswig of Citi Investment Research said in a client note on Monday that Pershing may think that Ron Johnson, who is set to become CEO of the Plano, Texas company on Nov. 1, will improve J.C. Penney's revenue and profits.
"Moreover, Mr. Johnson's long-term commitment to the success of J.C. Penney, as demonstrated through his $50 million investment in 7.5-year warrants, may have increased Pershing Square's confidence in its investment," she wrote.
Aside from Johnson's anticipated tenure as CEO, Weinswig said J.C. Penney's stock is down about 22 percent in the last month, which offers a buying opportunity.
The analyst maintained a "Buy" rating and $32 price target.