NEW YORK (AP) -- Skullcandy's stock rose in morning trading on Friday as an analyst boosted the company's rating, citing its new management team and healthy balance sheet.
Skullcandy Inc. makes headphones and decorative iPod cases and T-shirts, all emblazoned with a skull logo. Its products are sold in electronics, sporting goods and mobile phone stores, as well as online and through mass retailers like Target and Best Buy. Like other personal electronics and accessories makers, Skullcandy has had to deal with increasing competition and the changing preferences of finicky consumers.
Dan Wewer of Raymond James said in a client note that the upgrade accounts for the potential of Skullcandy's new management to come up with a strategic plan that could help the business return to profitable growth next year. Wewer said that CEO Hoby Darling, who took on the post in March, has recruited some new senior executives and finished consolidating product development, marketing and sales at its Park City, Utah, headquarters.
While some actions are pressuring the company's revenue and profits this year, Wewer says they could start to pay off in 2014. These moves include reducing operating expenses, keeping inventory from retailers that don't comply with some of its pricing policies and investing in new listening stations at retailers like Best Buy Co.
Wewer also feels that Skullcandy has enough liquidity to support its turnaround plans, as it had $29 million in cash at the end of the second quarter and is free of long-term debt. The analyst said the company also improved its liquidity further by adding a new low-cost $50 million credit facility.
Wewer raised Skullcandy's rating to "Market Perform" from "Underperform."
A representative for Skullcandy declined to comment.
Shares of Skullcandy added 24 cents, or 4.5 percent, to $5.63. Year to date, the stock is down 31 percent.