Tags: Analyst | RadioShack | Shares | Zero

Analysts: RadioShack Shares, Now Less than $1, Headed for Zero

Tuesday, 09 September 2014 05:17 PM

RadioShack Corp. shares tumbled Tuesday after Wedbush Securities cut its price target for the stock to zero, saying it believed a bankruptcy reorganization was imminent.

Wedbush analyst Michael Pachter, who previously expected the stock to trade at $1 within a year, said in a report that declining consumer-electronics sales and shrinking profit margins are undercutting RadioShack’s comeback effort. He reiterated an underperform rating, the equivalent of sell.

“Brick-and-mortar electronics retailers will see persistent structural decline as Internet sales continue to take share,” he said. “RadioShack has less financial flexibility to invest in price competitiveness, and its primary business is as a consumer-electronics convenience store. We believe the Internet is more convenient.”

RadioShack Chief Executive Officer Joe Magnacca has been remodeling RadioShack stores and revamping its product lineup in a bid to revive sales. Still, analysts and investors have grown increasingly concerned that the unprofitable company won’t have enough time to execute the turnaround. It reports its latest quarterly results on Sept. 11.

RadioShack’s stock fell 23 percent to 94 cents in New York trading, the steepest one-day decline since July 2012. Shares of the Fort Worth, Texas-based company have lost almost two-thirds of their value this year.

Out of Spotlight?

Pachter isn’t the only analyst with a $0 price target. Scott Tilghman at B. Riley & Co. in Boston also sees the stock flat-lining in a bankruptcy scenario.

“It would be a much easier go for them to file and rework the business rather than try to do it as a heavily scrutinized public company,” Tilghman said in an interview last week.

The company may have other options, though. Standard General LP, a major shareholder, has discussed providing a rescue financing package to RadioShack, Bloomberg reported last month. An agreement could help give the retailer more leeway as it closes underperforming stores. Magnacca had attempted to shut 1,100 locations earlier this year, but the effort was blocked by creditors. That forced him to limit the closings to 200.

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RadioShack Corp. shares tumbled after Wedbush Securities cut its price target for the stock to zero, saying it believed a bankruptcy reorganization was imminent.
Analyst, RadioShack, Shares, Zero
Tuesday, 09 September 2014 05:17 PM
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