September 10, 2014 / 4:04 PM / 5 years ago

RadioShack plunges after brokerage cuts price target to $0

(Reuters) - Troubled electronics retailer RadioShack Corp’s shares have lost nearly a third of their value since brokerage Wedbush Securities said on Tuesday the company could file for bankruptcy soon, making the stock worthless by the end of this year.

The exterior of a RadioShack store is seen in the Queens borough of New York March 4, 2014. REUTERS/Shannon Stapleton

The stock fell as much as 20 percent to 76 cents on Wednesday, adding to a 23 percent plunge on Tuesday.

“Our price target reflects our expectation that creditors will force a reorganization and wipe out RadioShack’s equity,” Wedbush analyst Michael Pachter wrote in a note.

Pachter, rated four stars out of five by StarMine for the accuracy of his calls on RadioShack, is the second top rated analyst to cut the stock’s price target to $0 this year.

RadioShack’s stores, which have been around for more than 90 years, were once the go-to shops for budding innovators and engineers for products that ranged from vacuum tube speakers to the first mass-produced PC, the TRS-80.

But the retailer has not done enough to transform itself into a destination for mobile phone buyers, losing out to rivals such Inc and Wal-Mart Stores Inc.

It reported its ninth straight quarterly loss in June and is burning through cash as it struggles to sustain its turnaround efforts, which have so far failed to bear fruit.

Pachter, who previously had a price target of $1, said he was lowering the target as declining sales of consumer electronics and falling margins were likely to force the company to seek bankruptcy protection to turn around its business.

RadioShack attempted to close 1,100 stores this year, but lenders did not agree with the plans, forcing it curb the closings to 200 stores a year.

Pachter has an “underperform” rating on the stock.

The stock has fallen from a high of $78 at the peak of the dotcom boom to 76 cents as of Wednesday.

Of the 13 analysts covering the company, seven have a “sell” recommendation on the stock, while the rest have a “hold” rating, according to Thomson Reuters data.

Reporting by Ramkumar Iyer in Bangalore; Editing by Saumyadeb Chakrabarty

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