Ahead of the Bell: RBC analyst upgrades RadioShack

RBC Capital Markets analyst Scot Ciccarelli raised his rating on the Fort Worth, Texas, company to "Sector Perform" from "Underperform."

"The company is still profitable, generating positive cash flow and is inexpensive on most metrics," Ciccarelli said in a note to clients.

Yet he said the company's "conundrum -how to drive sales growth without incurring significant gross margin deterioration -remains," he said.

One particular source of pressure is Best Buy Co.'s "aggressive rollout" of its mobile stores, Ciccarelli said, noting Radio Shack's wireless business comprises about 30 percent of total sales, he said.

Ciccarelli's $18 price target implies he expects the stock to rise about 19 percent over Monday's $15.16 close.

In fall 2006, Julian Day became RadioShack's chief executive amid a series of management changes.

Since then, the company has stopped hemorrhaging cash, fixed its balance sheet and hosted several meetings with investors, Ciccarelli said, and now "management is trying to figure out' how to make the business grow.

"While this may remain an elusive goal, the fact that they are now trying to grow the business (and starting to tell investors about it), should be read as a positive in our view," Ciccarelli said.