After RadioShack (RSH) released earnings yesterday, the folks at Wedbush have reiterated their belief that the beaten-down retailer’s stock is heading to $0. Analyst Michael Pachter and team explain:
Getty Images It appears to us that RadioShack will quickly running out of liquidity options and must raise capital in order to survive this holiday season. The company proposed several alternatives, including a sale, a partnership through a recapitalization and investment agreement, and in or out-of-court restructuring. RadioShack anticipates announcing a recapitalization alternative in the near term. We believe the most expedient and likely solution is a prepackaged bankruptcy.
Reiterating our UNDERPERFORM rating and 12-month price target of $0 as declining CE sales and continued margin erosion will likely compel the company to enter bankruptcy in order to pursue its turnaround. Our price target reflects our expectation that creditors will force a reorganization and wipe out RadioShack's equity.
Shares of RadioShack have dropped 10% to 92 cents at 2:34 p.m. today.
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