Video Killed The Radio Star, And Online Shopping Killed RadioShack
RadioShack’s consistently bad performance has resulted in the stock being labeled absolutely worthless by many analysts. Here is the bidnessmen’s verdict on the company
Although some would find this hard to believe, it was just six years ago that RadioShack (RSH) reported revenues of $4.22 billion. Today, things are the utter opposite of what they used to be in the good old days when RadioShack ruled our hearts.
More than just turning out average performances, what RadioShack seems to be doing is sending distress signals, day after day, month after month, and quarter after quarter – for nine straight quarters, actually. The once-reputed electronics retailer is struggling to survive and has reported yet another quarter with disappointing results, causing its stock price to spiral further to rock-bottom-ville, located just above you-better-be-dead-town.
The company's dismal performance led one Wall Street analyst to proclaim that the stock is absolutely worthless.
Scott Tighman, an analyst at B. Riley, went even further and slashed RadioShack’s price target to an astounding and absolute $0 from a shameful $1.
Now consider the fact that the same stock was comfortably trading at around $20 in 2010.
Tighman also said that as far as any good news regarding a miraculous comeback by RadioShack is concerned, there is “no recovery in sight.”
The analyst took it a step further and said that the chances of RadioShack filing for bankruptcy are “over 50%.”
If you’re laboring under the delusion that Scott Tighman has a hidden vendetta against RadioShack, here’s what Michael Pachter, an analyst at Wedbush Securities, had to say about the ailing electronics retailer: "RadioShack has everything moving in the wrong direction: Comps are down double digit, gross margins are declining, and operating expenses as a percentage of sales are going up. This is a triple whammy, and it's pushing them closer to extinction."
Seeing RadioShack in this disastrous condition, we can’t help but wonder what went wrong with the once-successful electronics retailer, which dominated the market for nearly 90 years. Well, to be honest, it doesn’t take a rocket scientist to figure out that the company was slow in evolving with the changing times and trends, and thus hammered the last nail in its own coffin.
If anything, RadioShack should have been the first to take its business online, offer competitive prices, and swift delivery of goods, but it instead left the space empty for companies like Amazon (AMZN) and eBay (EBAY) to enter and beat it at its own game. That, coupled with average customer service, is a perfect recipe for disaster, which, when fully cooked, becomes an unstoppable spiral into destruction. This is exactly what happened to RadioShack, which now can’t even give Best Buy (BBY) a tough time.
Sadly, it seems that RadioShack CEO Joseph Magnacca is still oblivious to his company’s imminent demise: "While we face headwinds in our sector of retail, we have a clear vision for RadioShack's future and a detailed strategy to turn the business around."
Although we would like to believe in Mr. Magnacca’s optimism - and we desperately wish we could because we do not want to see RadioShack close its doors, not only for its customers, but also for the people working there - we have no alternative but to firmly retain our belief that it would probably be better to set our money on fire than to invest in RadioShack.