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Surviving RadioShack in a Wal-Mart World

NEW YORK ( TheStreet) -- If you're a current RadioShack (RSH - Get Report) investor, Wednesday's earnings release must have you wishing you could avoid your computer Thursday. I recently sold put options in RadioShack, so I share your frustration.

RadioShack has lost about 29% of its market cap from Tuesday's close. The loss in share price is primarily from the surprising earnings miss and loss.

I'd like to think the announced dividend cut didn't drive the price lower. A dividend cut was all but certain and as I sold the put options I knew the odds were high the dividend was on the endangered species list.

Today's move didn't break through any support levels because there are none. The next area of support to watch is $0 (yes, zero). The widely watched 200-day moving average doesn't come into play until $7.70.

RadioShack is oversold on the daily and the weekly charts, but without a support level it's make or break time.

RadioShack CEO Jim Gooch stated:

We were disappointed in our gross margin rate performance, as the initiatives we have under way have not yet generated enough momentum to improve the trend.
...(L)et me move over to the performance for the quarter. As I said, the profitability was below our expectations. Gross margin was a significant issue, largely driven by the profitability in our Mobility business.

Insiders reportedly sold no shares in the last six months. Insiders were not buying either, but since they only hold a million shares, it's not clear management believes in the stock.

( TheStreet's Tim Melvin provides his opinion on four stocks including RadioShack in his article High on the New Lows .)

As for RadioShack's competitors, the soft economy is allowing Wal-Mart (WMT - Get Report) and Target (TGT - Get Report) to execute well, and both are trading higher with conviction from a year ago.

Wal-Mart revenue year-over-year has increased to $446.95 billion in fiscal year 2012 compared to $421.85 billion in the previous year. The bottom line has falling earnings year-over-year of $15.70 billion in the last fiscal year compared to $16.39 billion in the previous year.

While Wal-Mart earnings have declined, the rising revenue has to come from somewhere, and somewhere includes RadioShack.

Wal-Mart has appreciated 34.6% in the last year, and the average analyst target price for Wal-Mart is $67.64.

Target's last quarterly earnings release was May 16, and the previous closing price was $55.32. The current price of $60.36 is higher by 9.1%. No surprises why, the top and bottom lines tell the entire story.

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RSH $0.31 12.76%
AMZN $375.56 0.00%
BBY $36.46 0.00%
TGT $80.02 0.00%
WMT $77.88 0.00%


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