Markets & Finance

Prudential Cuts RadioShack to Neutral from Overweight

Prudential downgraded RadioShack (RSH) to neutral from overweight, explaining that the company's transition to Cingular from Verizon (VZ) appears to be more difficult than expected.

Analyst Mark Rowen says that sales of Cingular wireless service at RadioShack stores appear strong in certain parts of the country, he believes management underestimated Verizon's stronghold particularly in large Northeast cities. He believes that RadioShack may ultimately be able to deliver on its turnaround plan, but he now thinks weak short-term results could put further pressure on the stock, given the importance of the wireless business to RadioShack's profitability. He maintains his $1.37 2006 earnings per share (EPS) estimate and cut his $26 stock price target to $20.

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