RadioShack Corporation (RSH) End Seems Near; Analyst Cuts PT to $0

RadioShack Corporation (NYSE:RSH) is really in big trouble. It seems that the end of its business operation is near following its very disappointing first quarter financial results, which sent its stock price into a steep decline.

Shares of the struggling electronics retailer are trading at $1.35, down by more than 5% at the time of this writing, around 3:00 p.m. in New York. Yesterday, the stock price of RadioShack Corporation (NYSE:RSH) plunged more than 10%.  The retailer’s shares have declined more than 47% year-to-date.

Seth Klarman: Investors Can No Longer Rely On Mean Reversion

Volatility"For most of the last century," Seth Klarman noted in his second-quarter letter to Baupost's investors, "a reasonable approach to assessing a company's future prospects was to expect mean reversion." He went on to explain that fluctuations in business performance were largely cyclical, and investors could profit from this buying low and selling high. Also Read More

RadioShack’s cash burn

An analyst at B. Riley & Co. reduced his price target for shares of RadioShack Corporation (NYSE:RSH) from $1 to $0 after the company posted higher-than-expected losses and a huge sales decline and disclosed its plan to close 200 stores.

In a note to investors, B. Riley & Co. analyst Scott Tilghman noted that RadioShack Corporation (NYSE:RSH) is burning cash fast and said that he is worried about it. He said that the electronics retailer’s turnaround hopes are based on “crossed fingers rather than hard data.”


Tilghman also estimates that the possibility of RadioShack Corporation (NYSE:RSH) filing for bankruptcy is more than 50%. The analyst added that the retail chain’s liquidation value is minimal. According to him, it is unlikely that an investor will step forward to save the company.

“The likelihood of a white knight at this stage of the game is limited, especially given the lack of attention the company has received during the last two years as it burned through $500 million,” according to Tilghman.

In an interview with CNNMoney, the analyst said RadioShack Corporation (NYSE:RSH)’s problems are similar to those of Circuit City, which filed for bankruptcy in 2008. The bankrupt electronic retailer went out of business the following year.

Biggest challenge

According to Tilghman, the biggest challenge confronting RadioShack Corporation (NYSE:RSH) is the strong competition in the wireless market from bigger electronics retailers such as Best Buy Co Inc (NYSE:BBY) and Staples Inc (NASDAQ:SPLS)—which are also dealing with their own problems and implementing strategies to boost their competitiveness.

In addition, the do-it-yourself tech hobbyist market is not big enough to be considered profitable.