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Shares of RadioShack Corporation (RSH) moved sharply lower on Wednesday to a new 52-week low following a disapointing second quarter earnings report and a decision to suspend the dividend.

(click to enlarge)RSH ChartRSH data by YCharts

Earnings Report Highlights

  • 21 cent per share loss compared to a 23 cent per share profit a year ago.
  • $517 million in cash.
  • $679.3 million in debt
  • Dividend suspended.

Declining Business

In my opinion, the problem with RSH is not operational. Rather, the business of selling consumer electronics is declining. Other companies engaged the same business such as Best Buy (BBY), and HHGregg Inc (HGG) have struggled. I think Amazon (AMZN) will continue to make it difficult for the entire industry.

Short Interest

Currently, the short interest in RSH stands at 42.9% of the float. It should be noted that if anything positive were to happen for RSH, the stock could move sharply higher.

My Opinion

Despite the major decline in the stock, I would avoid RSH. While the stock might bounce in the short-term in something of a capitulatory trade, I would use any lift to sell RSH. Jim Cramer often talks about telling the difference between "a broken stock and a broken company" I firmly believe RSH is a broken company, not a broken stock. Investors should avoid the stock.

Source: RadioShack Plunges: Investors Should Stay Away