If you will go back to summer of 2006 you will see that in the 18-months prior period that this slid from the $30′s down to $15.00 and briefly under.  Then it hired turnaround expert Julian Day as Chairman & CEO and the shares barely saw a $15.00 handle on the stock after that.  He came in and worked his magic and shares were back up to $20.00 before the end of 2006.  Then shares came back down a bit but shares climbed rapidly during 2007 back up to $35.00 before selling off in the summer.

It’s been an ugly situation since then.  In fact it has been so ugly that shares are back on 52-week lows and here they are challenging $15.00 yet again.  The shares are back to where they were before Day took the helm, just like he didn’t matter.  We don’t agree with this thesis at all, but money-flows in and out of stocks talk much louder than one opinion.

Analysts had been downgrading this stock throughout the year based upon valuations.  The last two upgrades were only covering essentially what were sell ratings: raised to Market Perform at BMO Capital Markets this morning and raised to Neutral at Banc of America on December 20.  Analyst price targets are only about $20 or slightly higher, so it appears the turnaround juice has been squeezed out of it.  At least that is what Wall Street thinks.

The stock is now cheap on a forward earnings multiple of 10 or under.  But when you see the retail picture the way we are seeing it then you have to question how much farther down the estimates will have to come.  A recession is starting to be priced into stocks, and retail and credit aren’t expected to improve tomorrow.  In fact, if you look at stock charts then the market participants are acting like things are about to get much worse.

If we owned a retailer in trouble we’d love to hire Julian Day.  Wall Street isn’t giving him the same vote today.

Jon C. Ogg
January 4, 2008

The prior target from Citigroup had been $32.00, but the new target is now $20.00 after this sell rating.  We noted yesterday how RadioShack is still shrinking.  RadioShack has already given back half of its post-implosion gains from last year to this year.  It seems as though the easy money that was to be made off of Julian Day stepping into the company has been made.  Now the company has to really show what it is worth to continue driving gains rather than riding off its first turnaround efforts.

Julian Day is a stallion, that isn’t in question.  But the easy money off of him has come and gone.  Shares are down close to $10.00 from the highs just in the last month, and it’s hard to tie a 30% drop merely to the weak market of last week.  Shares are gapping down over 2% to just under $25.00 in pre-market trading.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.