Analyst thinks RadioShack stock going to $0

'We think survival is in real jeopardy,' writes Scott Tilghman. That price target isn't far -- shares traded for $1.16 Thursday.

By InvestorPlace Jun 12, 2014 12:26PM

People walk past a RadioShack store in Manhattan on July 26, 2012 in New York City (© Mario Tama/Getty Images)By Kyle Woodley


RadioShack (RSH) earned one of Wall Street's biggest slaps to the face Wednesday after B Riley analyst Scott Tilghman threw out a big, disrespectful doughnut as his price target for the ground-bound electronics retailer.


Phrases like "we think survival is in real jeopardy," "the odds of a bankruptcy filing are now over 50 percent" and "a turnaround is nearly impossible for the company at this point" pretty much sum up his case for the ultimate bearish end game for RadioShack stock.


My only question? What took you so long, dude?


This fire wasn't lit yesterday

Sure, the writing on the wall has gotten extra bold of late. A couple months ago, RadioShack has announced massive store closings alongside its dreadful quarterly earnings. Credit default swaps were indicating that RSH had an 86 percent chance of default by June 2015.


And that $0 target ain't that far away -- RadioShack stock plunged even more Tuesday and Wednesday to get ever closer to the perilous dollar delisting line.


But come on. You didn't see this coming years ago?

The stock hasn't been slowly dying -- it has been in full-blown Last Crusade decay as the likes of Wal-Mart (WMT), Target (TGT) and Amazon (AMZN) all rendered the company useless, and Best Buy (BBY) -- while still struggling -- at least holding its own against RadioShack thanks to its size and scale.


As the big-box stores and Internet retailers increasingly competed on price, RadioShack found itself unable to do much of anything -- not enough scale to match them on stickers, and no specialization to become a value-added niche retailer.


Anecdotally, it's been difficult to miss the jokes about disorganized stores. Or those reflective moments of "When's the last time I was in a RadioShack?" on the rare occasion a co-worker mentions the place.


But it's the financials that truly paint a grim picture.


Revenues have dipped some 20 percent since 2010. Profits are far worse -- $206 million in earnings recorded four years ago, but a loss double that size last year. Debt (as a percentage of capitalization) has ballooned from 43 percent to nearly 75 percent. Not to mention, it has been nearly two years since RadioShack killed off its dividend.


If you somehow still hold shares, you might have noticed, given that the stock is:

  • Down 51 percent year-to-date
  • Down 87 percent since Jan. 1, 2012
  • Down 95 percent since its five-year high around the mid-$23s in April 2010.

We got an ever-so-brief glimmer of hope earlier this year, when RadioShack appeared to be throwing a last-gasp desperation punch to renew its brand. The self-deprecating '80s-palooza Super Bowl commercial showed that RSH was, if nothing else, at least aware of its perception, and determined to do something about it.


So much for that. RadioShack stock is off about 45 percent since the Seahawks put down Peyton & Co.


Bottom line

Honestly, my prodding of Tilghman is just in jest. He already considered the stock a "sell," and besides, analyst targets typically speak toward the next 12 to 18 months. In other words, this isn't necessarily the nebulous prediction many of us has made -- Tilghman's call implies something of an expiration date.


If so, he could be dead-on. RadioShack's cash situation is reminiscent of a Viking funeral, and several analysts have pegged the final pennies burning up in 2015 or as soon as the end of this year. Meanwhile, short of a miracle holiday season, there's nothing in the offing that seems likely to pull RSH out of the fire.


RadioShack is going down. Calling the bottom might be an obvious move, but it's the right one.


More from InvestorPlace

Kyle Woodley is the Deputy Managing Editor of InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley.

54Comments
Jun 12, 2014 3:25PM
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Radio Shack used to be a place to get repair parts,electronic projects, and audio equipment and other things. It was a store that carried what nobody else did. Now all they sell are phones and junk from China. Blame the inept managment for the companies crash
Jun 12, 2014 2:59PM
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if the stock price hits zero, I'm going to buy a million shares of it.
Jun 12, 2014 3:55PM
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I stopped going to Radio Shack when I asked one of the sales clerks to use an ohmmeter to check the resistance rating on an ignition key I wanted to duplicate and the sales clerk asked me "what's an ohmmeter". He then informed me that they didn't carry what I had termed an "ohmmeter".


Jun 12, 2014 4:19PM
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They're still in better shape than the US government!
Jun 12, 2014 12:35PM
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add then to the Sears, Penny's, etc group of dead cat bouncing stores.
Jun 12, 2014 3:40PM
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in the 80's I'd go to the Radio Shack every time I went to the mall, it was the only store in the mall I cared about.  Today I was waiting for a hair cut, and walked by the Shack.  Didn't bother going in, I'd rather wait in the crowded Great Clips.  That is how little Radio Shack has done to retain it's customer base.  Part of the problem is that the Shack catered to electronics techs that repaired stuff.  Now we don't bother to repair anything.  We replace it because it is cheaper and better.  Radio Shack needed to pivot into Best Buy, and then Amazon.  They didn't.  Sorry to see them go.
Jun 12, 2014 3:43PM
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MSN has been after Radio Shack for some time now.. It must be an anti liberal company.
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AMAZON drives another retailer into BANKRUPTCY......many more will follow. 
Jun 12, 2014 1:56PM
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My kids called this RadioCrap as we have returned nearly every purchase throughout the years.
Jun 12, 2014 3:38PM
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It almost looks like the market is rejoicing that a company is going out of business.  I don't like seeing companies closing their doors, since they mean jobs for many people out there.  Its a shame that their Management was not able to turn it around.


We do live in a free market, so if they survive or not depends on them totally

Jun 12, 2014 2:23PM
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I have been in the local Radio Shack recently once I was the only customer. Then other time it was crowded me and two other people.
Jun 12, 2014 3:35PM
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Every thing I bought at Radio Shack never worked right,time for them to go BYE,BYE
Jun 12, 2014 3:00PM
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Frankly I'm surprised that they made it through the 70's. I worked for Tandy in 73-74 was offered a district Management job but flat turned them down. They had a bogus commission system that only rewarded management and the store managers robbed them blind during the holiday season because of a poorly designed revenue transfer system to corporate offices. One manager I knew skipped after Christmas Eve with over $25K in cash and another $40K in merchandise. They found him in Hawaii a couple of months later, extradited him back to Las Vegas then dropped all charges as he promised to publicize how easy it was. In fact the manager that trained him had also shown him how to exploit the process.
Jun 12, 2014 4:35PM
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If they had gone heavy into the radio control hobby and marketed hard MAYBE things would have worked out.
Jun 12, 2014 4:30PM
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Radio Shack got away from what it did best years ago and has been dying ever since. Its a walking corpse.
Jun 12, 2014 4:26PM
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Radio Shack is simply too expensive. They charge $20 for a cable I can buy from Amazon for $2. I only use them when I absolutely have to do so.
Jun 12, 2014 7:49PM
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Decided to purchase something from the Radio Shack using their online website (for convenience about 3-4 yrs ago). Unfortunately there was a defect with the product, so I went to a store location to exchange the item since I did not want to send it back through the mail and wait even longer etc. In short, they would not exchange it since I purchased it online. Hated that. Never shopped there again.

Jun 12, 2014 6:09PM
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You used to be able to buy resistors, diodes. switches and the material's to make a printed circuit board at Radio Shack.


Now they don't have anything you can't get somewhere else.

Jun 12, 2014 5:24PM
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What do you mean, Excalibur? Radio Shack was going down the tubes WAYYYY before the INTERNET, let alone Amazon came along. Back in the '60s and '70s, you could get halfway decent stereo/electronic components [not top of the line, but halfway decent]. I remember my parents and older uncles saying it was a GREAT place to get replacement parts for certain electronic products people had in their homes.

What killed Radio Shack was advancing technology, their prices [which were double or triple their competitors for what they DID sell], and their idiotic strategy they tried to pull off the last 10-15 years.

Jun 12, 2014 5:10PM
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IIt's been a while since I went to radio shack for anything.  I don't need any big ticket items and the old style flip phone (beam me up scotty) I bought for $19.95 about 15 years ago still works fine so they really have nothing I want.  I did look for a replacement battery for my wireless wall phone but they wanted way too much, $23.99 comes to mind!  They had another battery just like it that had a different connector but a lot cheaper.  So I bought that battery for $3.99 and replaced the connector with the one from my old battery.  It worked fine for years.  They should change their name to Toy Shack and find a different market!
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