RadioShack shares soar on 'Buy' rating

[October 10, 2012]  NEW YORK (AP) -- Shares of RadioShack Corp. jumped nearly 9 percent Tuesday after a Wall Street analyst boosted her rating for the electronics retailer's stock to "Buy," saying that most of the risks surrounding the shares have already been factored into their price.

THE SPARK: Bank Of America Merrill Lynch's Denise Chai, who previously rated RadioShack at "Underperform," also increased her price objective for the stock by 50 cents to $2.50.

THE BIG PICTURE: RadioShack has struggled with dropping profits over the past two years.

The Fort Worth, Texas-based chain's troubles are partly due to wider problems in the brick-and-mortar electronics industry, but RadioShack has also has had company-specific problems.

In its latest quarter, the company reported an unexpected $21 million loss, as its shift toward selling smartphones and their accessories was not enough to offset a decline in demand in other consumer electronics.

Chai noted that in just the past two weeks, RadioShack has ousted its CEO and its stock was removed from the S&P mid-market index. The stock's dividends, buybacks and financial guidance have all been suspended.

THE ANALYSIS: "With the market cap equivalent to just 20 percent of inventory and accounts receivable, over $1 billion of liquidity and potential for new leadership to take action, we see opportunities for upside," Chai wrote in a note to investors.

But she cautioned that investors should probably brace for more bad news later this month when RadioShack issues its results for what was probably another tough quarter, although those expectations should already be factored into the company's stock price.

THE SHARES: RadioShack's stock has taken a beating this year, falling 78 percent. The stock dropped to an all-time low of $2.01 in last week. Midway through Tuesday's session the shares were up 18 cents, or 8.4 percent, to $2.26, after peaking at $2.38 earlier in the day.

[Associated Press]

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