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 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.
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
- The 7 best index funds for your money
- Should you sell Hilton stock?
- 10 awesome high-tech Father's Day gift ideas for 2014
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
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.
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.
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.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
An interest rate tease in The Wall Street Journal sends the market into an optimistic tizzy -- but one that doesn't end quite at the top.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.