Why RadioShack (RSH) is Jumping on Monday

NEW YORK (TheStreet) -- It shoots, it scores. RadioShack (RSH) is popping on Monday after its Super Bowl advertisement was declared a winner. The 60-second spot poked fun at the retailer's dated stores, having 1980s stars including wrestler Hulk Hogan, Alf and Mary Lou Retton storm the store to "take back" their technology.

And it was a winner, according to Twitter.

The advertising campaign marks RadioShack's foray into a rebranding.

"This is a bold, strategic move for RadioShack, and we're using the Super Bowl as the platform to get people to rethink RadioShack," said chief marketing officer Jennifer Warren in a statement. "It's out with the old and in with the new."

CEO Joe Magnacca added, "We wanted to directly address outdated perceptions of RadioShack... We have committed significant work in stores across the country, with design and product assortment, as part of our turnaround effort."

Over 2013, the company updated nearly all 4,300 U.S. company-owned stores, including more than 100 concept and brand statement stores with redesigned interiors and new exterior signage.

By midday, shares have popped 6.7% to $2.56.

TheStreet Ratings team rates RADIOSHACK CORP as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate RADIOSHACK CORP (RSH) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RADIOSHACK CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, RADIOSHACK CORP swung to a loss, reporting -$1.15 versus $0.64 in the prior year. For the next year, the market is expecting a contraction of 80.9% in earnings (-$2.08 versus -$1.15).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 138.6% when compared to the same quarter one year ago, falling from -$47.10 million to -$112.40 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, RADIOSHACK CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RADIOSHACK CORP is currently lower than what is desirable, coming in at 30.41%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -13.95% is significantly below that of the industry average.
  • The share price of RADIOSHACK CORP has not done very well: it is down 20.14% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.