Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Sprint: Value Trap or Value Trade?

We believe Sprint (S) may be an attractive value play at current levels, as we believe negatives (higher than average churn, universally unloved, lower profit margins than peers) are already priced into the stock. Specifically, we believe there are 4 key catalysts that will propel the stock forward over the next 6-9 months:

1. We believe Sprint’s unlimited mobile-to-mobile plan will help stabilize subscriber attrition. In a recent sell-side upgrade, Wells Fargo noted that the company is holding its own in market share gains. Better than expected churn figures and/or subscriber additions would positively impact results.

2. In the summer, Sprint and HTC are launching the first 3G/4G smart phone. A successful launch would be a huge plus in restoring the company’s reputation as a leader in technology.

3. In the last year, Sprint generated $2.8 billion in free cash flow. At the current level, Sprint is trading at 4.5 times free cash flow. While Sprint carries a large amount of debt, it intends to pay off maturities with cash flow.

4. There have been rumors of potential buyout by Deutsche Telecom’s (DT) T-Mobile subsidiary.

At around $4 per share, Sprint is universally unloved. We believe all of the negatives are priced into the stock. However, we believe if any or all of the above mentioned catalysts come to fruition, Sprint’s shares could see significant price appreciation over the next 6-9 months. Target price - $6.00.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.