AG Edwards Downgrades JC Penney to 'Hold'

Analyst Roberts Buchanan says rumors of more evidence that the company's chain of drugstores over-charged for prescription pills puts a cloud over the stock

AG Edwards downgraded JC Penney (JCP ) to hold from buy.

Analyst Roberts Buchanan says there's word of fresh evidence in a lawsuit charging Eckerd with over-charging on liquid prescriptions, which prompted him to downgrade. Although he has absolutely no way of knowing whether there is any truth to the new evidence -- which purportedly adds an additional 36 examples of inflated prices to the original two, alleging at least several hundred millions of dollars in fraud -- it raises again the issue of a psychological cloud that he fears will hover over JC Penney's investment thesis for months to come. Until the cloud dissipates or moves on, he's not comfortable recommending the stock.

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