RadioShack: Are We there yet?
My mother used to tell a story about me when I was little that went something like this. The family was setting out for a holiday in the country, maybe a 4 or 5 hour drive away. The parents had prepared us kiddies for the longer-than-usual drive, telling us we’d only get there late in the afternoon (after several rest stops). We’d packed our numerous bags and loaded up the car with snacks, blankets and pillows. But not five minutes into the drive I piped up from the back seat, “Are we there yet?”. I think every parent will commiserate.
Well, you may be asking the same thing about RadioShack. “Are we there (at the bottom) yet?” After all, the most optimistic outcome laid out in my last post came about; RSH announced an unexpected loss for Q1 and the shares promptly tanked. They’re now priced below $5.00 where I said I might take a full position. Have I? Nope. Not on your life. Why should I? Is any positive news going to come out before next quarter’s earnings release? What about ‘window dressing’ at the end of the second quarter? Aren’t there a few die-hard institutional investors still holding that will need to bail because the price is below $5.00? And what happens in July when, more likely than not, they announce a loss for the second quarter? You should be asking yourself how low can the shares really go? And my answer is …. well not exactly zero, but $2 or $3 is not unrealistic, especially if they reduce or suspend the dividend. Yes, the company is still flush with cash (unless they’ve unwisely been spending it… increased marketing, anyone?). Hey, management, if you’re so darn sure that you can pull out of this nose-dive shouldn’t you be buying in shares hand over fist? Well, are they? Probably not. Anyway, I don’t see it happening. So, let’s just wait and see how bad they really are at capital allocation.
OK, OK, I know I’m just mouthing off here. Maybe management will be able to turn things around this quarter. If so, RSH won’t be the great investment I’m hoping for. I can take it….or, in this case, leave it. I’ll just sit back and wait for the next fat pitch. There’s no umpire to call me ‘out’ in this game.