B. Riley Slashes Target on RadioShack (RSH) to $0; Sees Odds of Bankruptcy at Over 50%

June 11, 2014 10:11 AM EDT
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B. Riley is taking its price target on RadioShack (NYSE: RSH) from $1 down to zero while maintaining a Sell rating following recent quarterly results.

Analyst Scott Tilghman noted that Q1 comps fell 14 percent, versus his expectation of a 12 percent drop and the Street at negative 9 percent. The company blamed the broader CE market yet its comps were far worse than those of Best Buy for the comparable period suggesting market share is being ceded and traffic driving challenges persist. We expect sales declines to persist and think it will be nearly impossible for the company to drive traffic successfully without significant advertising expenditures or discounting at the expense of gross margin, the analyst noted.

Gross margin fell 370 basis points to 36.6 percent amid favorable inventory adjustments. While Tilghman sees that flattening, lagging sales will limit leverage opportunities.

Tilghman expands his FY14 loss per share from $2.60 out to $2.67.

Based on recent and expected cash burn, working capital and debt are likely to be at best, offsets to one another. We think a turnaround is nearly impossible for the company at this point, and think liquidation value is minimal,Tilghman said. He sees the odds of bankruptcy at over 50 percent for RadioShack.

For an analyst ratings summary and ratings history on RadioShack, click here. For more ratings news on RadioShack, click here.

RadioShack Corp. closed at $1.38 yesterday.

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