RadioShack gains on upgrade to 'Outperform'

RadioShack shares rise as Credit Suisse analyst issues upgrade on benefits of iPhone

• On 10:56 am EST, Monday November 9, 2009

CHICAGO (AP) -- Shares of RadioShack Corp. jumped on Monday, after the electronics retailer said it would start selling the iPhone, and an analyst upgraded the stock to "Outperform" saying the move would boost customer traffic.

Shares rose $2.48, or 14 percent, to $20.22 in morning trading.

RadioShack said it would start selling Apple Inc.'s iPhone, which Credit Suisse analyst Gary Balter said would drive customer traffic to the store and boost sales of higher-margin products. He upgraded the stock to "Outperform" from "Neutral."

Balter said the iPhone could add more than 25 cents to earnings per share. He anticipates a modest benefit in the fourth quarter but for that to increase next year as the device becomes available in all stores.

Another benefit for RadioShack, Balter said, is a partnership with Target Corp., which will operate wireless RadioShack kiosks in 1,700 stores nationwide. This could add between 10 cents and 15 cents per share to earnings, Balter said.

The addition of T-Mobile as a postpaid wireless carrier is also helping boost sales for RadioShack, he said.

Last month, RadioShack said third-quarter profit slipped 24 percent as the company closed some kiosks, but the company reported stronger sales for its Sprint Nextel postpaid wireless business. The addition of T-Mobile as a postpaid wireless carrier also contributed to revenue.

Balter's price target is now $25, from $15 previously. That implies shares have room to rise 40.9 percent from Friday's closing price of $17.74.

Buzz up!