The Outlook Is Rough For Electronic Retailers [RadioShack Corporation, Best Buy Co Inc, Amazon.com, Inc.]

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June 16, 2014 10:54am ETF BASIC NEWS

evilcomputerIf you’ve read the news recently, you know that the outlook is rough for electronics retailer RadioShack Corporation (NYSE:RSH). So rough that a B. Riley & Co. analyst cut his price target on the company from $1 per share to


$0.

And if RadioShack continues on the path we’ve seen this week, it won’t take long.

Currently at $1.28, shares of RadioShack saw a 10% drop on Tuesday and another 8% drop yesterday. This year, the company’s shares have lost more than half their value.

At the end of last year, RadioShack had about $550 million in assets. Now, just six months later, it has about $424 million.

Considering Circuit City’s similar collapse in 2009, is RadioShack next in a long line of electronic retailers to go under?

Analysts say it’s competition from big stores such as Best Buy Co Inc(NYSE:BBY) and Staples, Inc.(NASDAQ:SPLS) and carrier stores like Verizon Communications Inc.(NYSE:VZ) and AT&T Inc.(NYSE:T) that has RadioShack in the red.

But, in a consumer world led by Amazon.com, Inc.(NASDAQ:AMZN) and Wal-Mart Stores, Inc.(NYSE:WMT), even the big names are feeling the heat.

As one of the best-performing stocks of 2013, Best Buy posted a 238% return. But this year hasn’t been as kind. The stock is down 28% year-to-date.

In March, Staples announced that it would close 225 stores by the end of 2015 (RadioShack also just announced the closure of 200 stores). The company is now trading at a forward P/E  almost 29% less than the industry average.

But not all is lost. Industry-leading carrier stores are still poised for success.

Recently, Verizon recovered the remaining 45% stake of Verizon Wireless Network from Vodafone Group Plc (ADR)(NASDAQ:VOD). Company return on investment is 19.80% and quarterly revenue growth is 7.86%.

Similarly, AT&T is making big moves. The company is proposing a $48.5 billion merger with DIRECTV(NASDAQ:DTV). AT&T’s shares are currently priced at 13.14 times expected earnings for 2014. Quarterly revenue is up 3.6% on a year-over-year-basis.

As the big names battle it out, it’s probably best to follow Warren Buffett’s lead and stick with the megacarriers. You may not have $524 million to invest, but you may be able to squeeze out some profits.

by Rachel Gearhart, Managing Editor

Investment U provides cutting-edge research and strategic financial recommendations for all levels of investors through its morning publication Investment U Daily and its related publications.


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