Shares of Sears Holdings (SHLD), which have nearly doubled this year, were skyrocketing Thursday after the venerable retailer reported quarterly results that met Wall Street's low expectations. They were still god-awful.

Thanks to cost-cutting, the company narrowed its net loss to $132 million, or $1.25 a share, versus a loss of $152 million, or $1.42 a share, a year earlier.

Sales plunged 6.6% to $9.47 billion, continuing a decline that began in 2005.  Excluding one-time items, the loss was 86 cents. Wall Street analysts were expecting a loss of 86 cents on revenue of $9.63 billion.

Sears is in the midst of an extreme makeover. The company is planning to spin off its  Hometown, Hardware and Outlet stores and do a partial spin-off of its Canadian business. CEO Lou D'Ambrosio has also kept costs under control. Domestic inventory in the quarter fell $512 million, while selling and administrative expenses dropped by $123 million. The company, though, continues to struggle.

Same-store sales, a key retail metric, plunged 2.9% at Sears Domestic and 4.7% at Kmart because of weak sales of consumer electronics and lawn and garden supplies, which have been hurt by drought conditions in many parts of the country. The figures were also affected by store closures. 

Wall Street, though, sees better times ahead for Sears -- though that's all relative. Revenue in the next fiscal year is expected to decline 2.8%, an improvement over the 5.3% decline forecast for the current period. The average 52-week price target is $21.50, well under where it trades now. The future for Sears remains cloudy, even though the company's finances are in better shape.

Sears' middle class customer base continues to be stretched by a U.S. economy that's barely growing. The company, along with rivals like J.C. Penney (JCP) and Kohls (KSS), also continues to be squeezed by larger retailers, including Wal-Mart (WMT) and Target (TGT). Some analysts are even speculating that Sears may be liquidated.

But many people continue to believe in Sears. The stock continues to rise despite the company's negative press. Maybe investors are betting that Eddie Lampert, the billionaire who controls the chain, will take it private. Perhaps there is hope that the business will get better on its own if the economy improves, or that it will merge with a rival such as J.C. Penney or Kohls.

There are many questions about Sears that have no easy answers. For most investors, however, the risks associated with the stock don't justify the rewards.

Jonathan Berr is long Wal-Mart and Target. Follow him on Twitter@jdberr.