RadioShack Is Up 26 Percent, Should You Buy?

The Story. RadioShack (NASDAQ: RSH) shares are trading up as much as 26 percent higher Friday, after hedge fund Standard General stated that it had drafted a plan to boost the company's near term liquidity for the Holiday shopping season. Despite no assurance of a deal, market optimism still propped the stock up by +26 percent or $1.01 per share.

rsh_google_friday.pngSource: Google Finance

More Insight. Even if a deal would be signed, RadioShack is unlikely to stave off filing for chapter 11-bankruptcy protection.  At the current cash burn of $134 million in the latest quarterly filing, the electronic retailer has two years viability at best but more likely less than five months.

Even More. The problem with RadioShack is not the management, but rather the stiff competition in the electronic retail space, where affordability and quality are vital to maintain viability. Larger firms, having vast resources to horizontally expand and negotiate for cheaper supplies deals are able to pass down such discounts to their customers, enticing shoppers' loyalties. RadioShack does not have such size advantages like competing peers, including Wal-Mart (NYSE: WMT), eBay (NYSE:EBAY), Amazon (NASDAQ:AMZN) or BestBuy (NYSE:BBY).

rsh_equity.png

Source: Vincata 

Read more on this report at Retail Investor 360.

Disclosure: We have no financial interest in RSH.

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Caitlin Kennedy 4 years ago Member's comment

Buy? I don't think so. Radio Shack has no chance of avoiding bankruptcy, even if the company does indeed manage a Hail Mary this holiday season. It won't matter. Radio Shack can no longer compete with the big names. As a consumer, Radio Shack doesn't even exist in my vocabulary when I am making plans to go shopping. The brand has become eclipsed by big names like Walmart and BestBuy. Even with Walmart's poor employee relations and BestBuy's inventory problems, customers continue to flock to them. Branding wins out in the end.