Circuit City Flatlines

Just one week after Circuit City Stores, Inc. (CC) shares touched 45 cents per share after the company announced the closing of over 150 stores and the cutting of more than 7000 jobs, the consumer electronics retailer has file for Chapter 11 protection.  This comes a mere two weeks before holiday shopping season kicks into high gear…or whatever gear it is likely to kick into for 2008.

Based on a quote from an AP report earlier today which stated Circuit City Stores, Inc. was “facing pressure from vendors who threatened to withhold products during the holiday period,” this bankruptcy report is less than totally shocking.  However, though the shares had been precariously under $1 for an extended period of time — and have now effectively lost all value — analysts had not so much as stampeded its earnings estimates lower for the coming November quarter and fiscal year 2009 (ending February ‘09) as shown a slow leak of downward revisions.

Even though Circuit City shares had been rated a Zacks Rank #3 (”hold”), any time a stock has a target price of 30 cents per share, there is a real danger that things might get very dicey.  Will investors seek other retailers to short ahead of the year-end holidays, or was Circuit City simply the most in need of reorganization?

Posted in Categories: Contributor, External Research, Retail, Stocks.

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