STOCK TRADE: Buy RSH at market price (approx. $2.67), good for the day. Place a protective stop-loss at $1.50 and a pre-determined sell at $5.00.
by Ian Harvey
February 12, 2014
There have been several major occurrences surrounding RadioShack Corporation (NYSE: RSH) in the past couple of weeks, which should have a significant positive action on its stock price. These are:-
1. Jamie Zimmerman's Litespeed Management LLC, last Friday, disclosed an 8.1% stake in RadioShack Corp. Zimmerman is a famed hedge fund manager known for her incredible market-beating performance in the early 2000s. Most sources quote her firm Litespeed LLC as managing around $1.0 billion in assets and specializing in special situations, distressed securities, and bankruptcy.
This makes RadioShack a perfect candidate for her firm and could be a bullish sign for investors in the struggling retailer going forward. Zimmerman is known for being an astute analyst and if her track record holds up it could be good news for embattled RadioShack shareholders.
2. During the Super Bowl, Radio Shack ran a (highly praised) 30 second ad about how they're abandoning their 1980s image to unveil a "new" Radio Shack. The ad featured 80s celebrities like Mary Lou Retton, Hulk Hogan, CHiPster Erik Estrada, Alf, the California Raisins and "Cliff" from Cheers.
3. Zacks upgraded their recommendation on RadioShack to Neutral from Underperform despite disappointing third-quarter 2013 financial results of the company. Both the top and the bottom line significantly missed the Zacks Consensus Estimate. RadioShack's core Consumer Electronics retail business is on a secular downtrend. Nowadays, consumers prefer making online purchases to visiting retail stores. The rising trend of shopping through tablets and smartphones is lowering profits of the retail industry. This has also led to declining foot traffic, which has severely affected RadioShack's business. However, the company intends to extensively invest in the launch of several concept stores as a turnaround strategy. This is expected to significantly improve footfall at stores.
As for its stock, RSH has been stuck in a severe downtrend since 2010, dropping from highs near $24 to a low just above $2. However, while the July lows were eclipsed on the downside by the January decline, volatility did not make new highs. A bullish divergence like this is often a sign of price stability and a base forming, and the stock has rebounded almost 25% from the lows made less than a month ago.
RadioShack Corporation (RadioShack) is engaged in the retail sale of consumer electronics goods and services through its RadioShack store chain.
The Company’ segments include U.S. Radioshack Company-Operated Stores and Others.
As of December 31, 2012, the Company operated 4,395 U.S. company-operated stores under the RadioShack brand located throughout the United States, as well as in Puerto Rico and the U.S. Virgin Islands. These stores are located in strip centers and major shopping malls, as well as individual storefronts.
As of December 31, 2012, the Company had a network of 1,008 RadioShack dealer outlets, including 32 located outside North America. The Company's North American outlets provide name brand and private brand products and services.
|Current P/E Ratio (ttm)||-|
|Relative P/E vs. SPX||-|
|Earnings Per Share (USD) (ttm)||-2.5341|
|Est. EPS (USD) (12/2013)||-2.1000|
|Est. PEG Ratio||-|
|Market Cap (M USD)||267.43|
|Shares Outstanding (M)||100.16|
|30 Day Average Volume||3,341,806|
|Dividend Indicated Gross Yield||-%|
|Cash Dividend (USD)||-|
|5 Year Dividend Growth||-|
|Next Earnings Announcement||02/26/2014|
RSH has traded in a channel from $4 to $2 since mid-2012. An upside breakout of the range targets a move to $6. Buying at such discounted prices is attractive to traders wishing to position themselves for a recovery in the stock.
RadioShack Corp. last released its earnings data on Tuesday, October 22nd. The company reported ($1.11) earnings per share (EPS) for the quarter, missing the consensus estimate of ($0.36) by $0.75. The company had revenue of $805.00 million for the quarter, compared to the consensus estimate of $893.44 million.
During the same quarter last year, the company posted ($0.33) earnings per share. RadioShack Corp.’s revenue was down 10.4% compared to the same quarter last year. On average, analysts predict that RadioShack Corp. will post $-2.09 earnings per share for the current fiscal year.
Besides the upgrade by Zacks, RadioShack has been the subject of a number of other recent research reports:-
• S&P Equity Research upgraded shares of RadioShack Corp. (NYSE:RSH) to a hold rating in a report released on Thursday, 9th January.
• Separately, analysts at Wedbush reiterated an underperform rating on shares of RadioShack Corp. in a research note to investors on Wednesday, October 23rd. They now have a $1.00 price target on the stock.
Four research analysts have rated the stock with a sell rating and eight have issued a hold rating to the company’s stock. The company currently has a consensus rating of Hold and a consensus target price of $2.28.
RadioShack is set to report earnings in late February and any surprises will surely bring large stock price moves. Investors should keep a careful eye on how same-store-sales are performing at remodeled stores. Until then, investors can take comfort in one acclaimed fund manager jumping on the RadioShack bandwagon.
Therefore, based on the facts above the following stock trade is recommended…..
**STOCK TRADE: Buy RSH at market price (approx. $2.67), good for the day. Place a protective stop-loss at $1.50 and a pre-determined sell at $5.00.