The bank lowered RadioShack's price target based on a higher probability of default the retailer will face over the next three years.
"The cut primarily reflects the higher probability assigned to default within three years by the CDS market, now about 80% vs. 56% in October," analyst Matthew J. Fassler wrote. "The probability assigned to our $5 turnaround scenario is now 20%. This scenario is based on 1% EBIT margin vs. 2% previously, and 8.0X rent-adjusted EV/EBITDAR vs. 7X previously, as we would anticipate a higher multiple on a more depressed earnings figure."
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TheStreet Ratings team rates RADIOSHACK CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate RADIOSHACK CORP (RSH) a SELL. This is driven by multiple weaknesses, 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."