The company's earnings report painted a grim picture for the company, which is in the midst of a multi-year turnaround led by Chief Executive Ron Johnson. During the holiday quarter, its gross margin fell to 23.8 percent of sales from 30.2 percent in the year-earlier period because the company had to slash prices to clear unsold merchandise at season end.
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But Nagel thinks much of this margin erosion reflects Penney's efforts to get rid of old merchandise to make room for new items.
"It's very reflective of the ongoing struggles at J.C Penney, but it doesn't really tell me much about what's this chain is likely to look like as they remodel their stores and what's the ultimate profit potential of this turnaround company," he added.
Oppenheimer's price target for J.C. Penney over the next 12 to 18 months is $30, which is about 67 percent higher from where shares traded on Thursday.
"Look, this is going to be a long-term time turnaround," Nagel said. "You may get some initial positive data points, but it's going to be a long time before we can say that J.C. Penney's finally turned."
He added that Ron Johnson's announcement during the conference call to begin offering weekly sales to lure back a hesitant consumer is a positive for the retailer.
"I think that's a positive because that's really what's going to drive traffic into the stores," he said. "I think these shifts they're making are for the better of the company."
—By CNBC.com's Katie Little; Follow on Twitter @Katie_Little_
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Brian Nagel does not own J.C. Penney stock.