Boston, MA 09/17/2014 (wallstreetpr) – Best Buy Co Inc (NYSE:BBY) is expected to gain in several aspects of its business and stock if its rival, RadioShack Corporation (NYSE:RSH), is bought out of business. There have been suggestions from some analysts on Wall Street that RadioShack should consider selling itself to Amazon.com, Inc. (NASDAQ:AMZN). That move would reduce competition for Best Buy and also increase its sales and earnings.
The rumors of a possible demise of RadioShack, through a buyout, are already making the rounds, and they can be linked to the 2.3% gain in Best Buy Co Inc (NYSE:BBY) on Tuesday. Analysts at Deutsche Bank said, in a note, that the exit of RadioShack and the closure of its struggling 5,000 stores in the U.S. could end up sending more customers to Best Buy stores, thereby increasing sales and boosting earnings. The analysts further said that up to 11.5% of RadioShack’s business could flow to Best Buy.
Eliminating competition
If acquired by Amazon.com, Inc. (NASDAQ:AMZN), RadioShack would help the giant online retailer to showcase its products and improve its distribution services. In the meantime, Best Buy Co Inc (NYSE:BBY) would benefit from reduced competition, which is good for its top and bottom lines.
RadioShack Corporation (NYSE:RSH) is financially troubled, and the company was recently reported as considering $585 million in financing deal with UBS and Standard General LP, a move that is expected to save it from bankruptcy. Its loss in the most recent quarter almost tripled from a year ago while revenue declined to $673.8 million from $861.4 million for the latest quarter.
Bullish outlook
The majority of analysts that are currently covering Best Buy Co Inc (NYSE:BBY) are bullish on the stock. For instance, analysts at JPMorgan Chase & Co. (NYSE:JPM) recently raised their target price on the stock to $37 from $35. The same move was seen at RBC Capital where the stock was given a new target price of $36 from $34. Overall, the $12 billion consumer electronics retailer boasts consensus “buy” rating and average target price of $40.42.
