J.C. Penney shares were trading nearly 20 percent higher on Wednesday, a day after the department store said its same-store sales rose 3.7 percent during the crux of the holiday season.
But Wells Fargo analyst Paul Lejuez cautioned that investors shouldn't get ahead of themselves on the sales boost.
Although the company said that its comparable-store sales for the fourth quarter came in near the high end of its guidance—or between 2 percent and 4 percent growth—the retailer still has a long way to go in its turnaround.
"While this quarter represents an improvement over [the third quarter], and a step forward, it is by no means stellar given easy comparisons," Lejuez wrote in a note to investors. "[It's] certainly better than missing, but far from convincing that this is the start of a consistent trend."
The analyst also pointed to concerns about the company's valuation. He said that in order for Penney's to achieve its goal of $1.2 billion in earnings in 2017, it would need to post comparable-store sales gains of at least 4 percent each quarter for the next three years. While that isn't impossible, its not likely given the company's volatile trends and the promotional environment, Lejuez said.