Investment analysts from Bank of America Corp (NYSE:BAC) Merril Lynch upgraded their stock rating for RadioShack Corporation (NYSE:RSH) from “underperform” to a “buy” rating, with a price target of $2.50 per share, in a note to investors on Tuesday. The price target was 50 cents higher than the previous target price of $2.00 per share.
Shares of RadioShack Corporation (NYSE:RSH) soared by more than 12 percent to $2.33 during the morning trading at the New York Stock Exchange on Tuesday. The company’s lowest stock price was $2.01 per share, and its highest value was $13.94 per share during the 52-week trading period.
Analysts saw an upside opportunity for Radio Shack, under the new leadership of the company. They also cited that the company has more than $1 billion in liquidity; its market cap represents only 20 percent of its inventory, and AR. RadioShack Corporation (NYSE:RSH) appointed its executive vice president and chief financial officer, Dorvin Lively CEO.
The analysts wrote, “We are upgading RSH to Buy from Underperform, on our view that after a series of negative events, the shares have reflected most of the downside risks (-83% in the last 12M). In the last two weeks, RSH ousted its CEO/Chairman of the board, and the stock was removed from the S&P midmarket index. Dividends, buybacks, and financial guidance have been suspended. With the market cap equivalent to just 20% of inventory and AR, over $1bn of liquidity and potential for new leadership to take action, we see opportunities for upside and lift our 12-month PO to $2.50 ($2 prior), representing a Price/Sales ratio of 0.05x.”
In addition, the analysts expect the company to face a very challenging October quarter, but there are positive signs of stability.
According to the analysts, “The next news flow for RSH will likely be another very difficult quarter around October 24 or 25. However, we believe this has been well-telegraphed to the Street, and priced into the stock. We see numerous potential bright spots –or at least stabilization namely; GM declines have likely peaked and should ease as the negative impact from smartphones has mostly run its course, and liquidity appears sufficient for now. Domestic company-owned stores have been flat at just over 4,400 since 2006, despite revenues declining by around 10% since then.”
The electronics retail company’s financial performance during the previous quarter missed the 25 cents earnings per share average estimate of analysts. RadioShack Corporation (NYSE:RSH) reported 21 cents earnings per share ($21 million net loss). The company’s total net sales and operating revenue was $953.2 million, up by 1.2 percent from its previous result during the second quarter in 2011.