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%” 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?
RadioShack Stock – This Dumpster 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 Q4 earnings. Credit default swaps were indicating that RSH has an 86% chance of default by June 2015. And that $0 target ain’t that far away — RadioShack stock plunged even more Tuesday and Wednesday to bring RSH ever closer to the perilous dollar delisting line.
But come on. You didn’t see this coming years ago?
RadioShack stock hasn’t been slowly dying — it has been in full-blown Last Crusade decay as the likes of Walmart (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. 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% 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% to nearly 75%. Not to mention, it has been nearly two years since RadioShack killed off its dividend.
If you somehow still hold RSH shares, you might have noticed, given that the stock is…
- Down 51% year-to-date
- Down 87% since Jan. 1, 2012
- Down 95% 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 below 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% since the Seahawks put down Peyton & Co.
Honestly, my prodding of Tilghman is just in jest. He already considered RSH 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 stock is going down. Calling the bottom might be an obvious move, but it’s the right one.