We are upgrading our recommendation on
) to Neutral based on its current valuation, which plunged more
than 75% last year and is trading at the low-end of its 52-week
price range. We believe further stock price downslide is a remote
possibility at this stage.
Nevertheless, the nightmare of RadioShack continues to persist.
Firstly, the company's core consumer electronics retail business is
on secular downtrend and is unlikely to be revived in the near
future. Secondly, the customers increasingly prefer online purchase
instead of visiting brick-and-mortar retail stores. Loss of
footfall is taking a toll on RadioShack's mobility business, on
which the company is banking for its future growth. Thirdly,
instead of computers and cameras, majority of consumers prefer
tablets and smartphones, which are less profitable for the retail
RadioShack is facing bottom-line pressure for its lucrative
wireless platform. In the previous quarter, the company's net
income plunged 74.5% year over year. Moreover, the company faced
weak bottom line due to costs associated with transition from an
adverse product mix toward low-margin smartphones, T-Mobile to
Verizon Wireless partnership, and underperformance of its
Sprint Nextel Corp.
). Verizon Wireless is a joint venture between
Verizon Communications Inc.
Vodafone Group plc.
Although management remains confident of achieving future
business from Verizon, it believes that Verizon business needs more
consumer awareness and spend increasing amount for marketing. We
expect the wireless division revenue to remain almost same in 2012.
RadioShack also forecasted its net income to decline further in
2012.We believe overall turnaround may take more time than
RADIOSHACK CORP (RSH): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
VODAFONE GP PLC (VOD): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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