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Should you rush to buy Sprint stock now?

Posted: , by Victor H.

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Should you rush to buy Sprint stock now?
Sprint has been in the red in the last 15 consecutive quarters having to deal with the heavy luggage of Nextel and throughout that period uncertainty and a general bearish trend prevailed. Its shares have also dipped to their lowest level in the last almost two years. But while the future is not yet clear, there are a couple of factors that could either elevate or bring the carrier and its shares down. 

Today’s latest scoop about a Sprint-bound iPhone is the first such factor and it’s what tipped it for us - while it’s far from certain and nowhere near official it seems that the carrier run by Dan Hesse is finally about to get the iPhone 5. Secondly, the probable failure of the AT&T’s acquisition of T-Mobile might push Sprint stock up. Third and final is the carrier’s move to 4G LTE and an undergoing improvement of its network infrastructure.

Do those mark the perfect time to go all bullish and start investing in Sprint shares? And why could Sprint be a turnaround stock? 

Should you rush to buy Sprint stock now?
1. Sprint iPhone

The single biggest factor seems to be... the Apple iPhone. One might argue that the carrier has the dual-core Motorola PHOTON 4G and enough Android phones in its lineup, and the iPhone won’t make a difference. After all Sprint is expected to be the first US carrier getting the very successful Samsung Galaxy S II rebranded as the Samsung Epic 4G Touch. But it’s the operator’s own words that tacitly admit that without the iPhone, Sprint is at a competitive disadvantage, something that stroke us as the carrier underlined it in one of the arguments against the AT&T-Mobile merger. It could also be the perfect tool to heal Sprint’s bleeding post-paid subscriptions.

If the Apple device is such a gamechanger, it will certainly affect Sprint’s stock. There’s an increasing amount of evidence pointing to a Sprint-bound iPhone coming soon - starting with reports by the Wall Street Journal, continuing with Bloomberg confirming that a iPhone deal between Sprint and Cupertino has already been inked and ending with policy changes possibly signaling the arrival of the handset - early termination fees are getting hiked September 9th and some users have reported that their early upgrade option has been moved earlier to October, the date when the next-gen iPhone is rumored to roll out.

2. AT&T’s T-Mobile acquisition

The second big factor is AT&T’s planned $39 billion acquisition of T-Mobile. Most analysts and Sprint itself agree that it will deal a major blow to Sprint, leaving it in a mobile duopoly in which the carrier won’t be able to compete. Its 52 million subscribers would be dwarfed by a combined number of 132 million for the possible AT&T-Mobile behemoth and Verizon’s 106 million. 

In the last month or so Sprint’s shares have gone up and down, but generally hovered around an average of nearly $3.50, with the biggest push coming after the US Department of Justice filed a lawsuit to block the AT&T-T-Mobile merger over possible anti-competitive consequences of the deal. The Federal Communications Committee backed up the filing and recently the Now Network has added fuel to the fire and is also suing AT&T. The battle for Sprint is not finished yet, though, as AT&T will fiercely fight it on every possible level, but it seems that AT&T is in a less favorable position now.

3. Sprint’s network and financials

The third factor is a compound of elements focusing around the carrier’s own performance and that’s where Sprint disappointed analysts in its last quarter results. The carrier suffered heavy losses in post-paid subscribers and its aggressive pricing didn’t yield the expected results as profit margins fell. The carrier is undergoing an expensive network overhaul and in the third quarter, customer defections are expected to continue. These are some big concerns in the short term, which don’t draw optimism at all. 

Nonetheless, it seems that the vector of Sprint’s intentions points in the right direction in the long term. First of all, Sprint has finally announced a move from WiMAX to LTE as its future 4G technology with a big announcement planned for October. Second of all, the carrier has dealt with a big chunk of its heavy Nextel legacy. Sprint has also solidified its network coverage, so it won’t have to rely on roaming deals with other carriers that much. This is a move which is aimed at improving the elusive high profit margins.

Conclusion

Sprint's Q2 results collapsed its share price at the end of July

Sprint's Q2 results collapsed its share price at the end of July

Finally, analysts have been complaining that Sprint’s declining short term health hasn’t been addressed, but could it be that it’s Apple secrecy that covers a silver iPhone bullet for Sprint? A couple of investment advisers have upped their view on the carrier’s outlook in the last month, but the carrier’s weak financials don’t allow a unanimous “buy” recommendation. So while that doesn’t answer whether you should rush to buy Sprint shares now, it does give some food for thought, doesn’t it?

This article focuses on analysis and does not provide investment advice nor recommendations to buy or sell shares.

20 Comments
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posted on 07 Sep 2011, 09:35

1. SellPhones (unregistered)


I also heard yesterday they Sprint is changing the Return Policy from 30 days back to 14 days starting in October. Didn't VZW do the same this right before they lauch the iPhone? Does Apple somehow force Carries to a 14 policy so that people have less time to return their phone therfore cutting back the total amount of iPhones returned?

posted on 07 Sep 2011, 09:49

5. superguy (Posts: 268; Member since: 15 Jul 2011)


Of course, when AT&T and Verizon did this, they were absolutely evil and used as evidence of anticompetitive behavior. What say Sprint supporters over this?

Is this an example of Sprint's "innovation"?

posted on 07 Sep 2011, 10:07

8. Codename: Infamous (unregistered)


"Innovation", no its not they are doing whats already been done. Its a business apple is worldwide power. The people want the iphone with sprint service. Reducing the return policy to 14 is tragic as a result everyone who wants the iphone on Sprint win. Sprint existing customers wins and new customers no longer have to deal with AT&T or Verizon.

posted on 07 Sep 2011, 14:14

15. Phoneguy007 (Posts: 218; Member since: 02 Jun 2011)


you act as if sprint is a better company then vzw or att...

posted on 07 Sep 2011, 14:22

16. Phoneguy007 (Posts: 218; Member since: 02 Jun 2011)


att return policy is 30days no matter the phone

posted on 07 Sep 2011, 10:42

9. rwolf1984 (Posts: 518; Member since: 06 Jun 2009)


didnt hear about the change in the trial period...but ETF is going up to $350 and upgrade fee is increasing from $18 to $36

posted on 07 Sep 2011, 12:03

12. TheTrain (unregistered)


VZW changed it to 14 days but apple will not let the iPhone be returned to verizon. once you buy an iPhone you are stuck with it.

posted on 07 Sep 2011, 22:59

21. NeXoS (Posts: 277; Member since: 03 May 2011)


the iPhone was NOT a game changer for Verizon and it will NOT be a game changer for Sprint.

look back on earnings calls' numbers from when the iPhone was sold by Verizon. Verizon only added ~10-11% more iPhone sales.

it wasn't even close to the DOUBLE sales analysts were cheer leading.

posted on 07 Sep 2011, 09:38

2. remixfa (Posts: 13902; Member since: 19 Dec 2008)


I think the iphone will be good for long term growth. The trick is the merger. If the merger goes through its going to sink any growth they get because of the iphone and the purchase would have been pointless. If the merger is stopped (which i doubt) then you will see what you saw the other day with the DoJ suite... which is another jump in sprint stock.

My uneducated advice would be to buy it at the end of this month.. ride it through christmas IF they get the iphone, and then decide if u want to take the chance of the merger going through or not. if not.. dump it immediately after Q4 or as soon as u hear the merger is about to go through (though it will take a hit the moment that happens)

posted on 07 Sep 2011, 09:45

3. Victor.H (Posts: 380; Member since: 27 May 2011)


That's right, Verizon did it just before the iPhone launch, but it doesn't look like Apple's forcing carriers as AT&T still allows 30 days for returns afaik. Interesting, SellPhones, where did you hear about a change in Sprint's return policy? A link would be very welcome.

posted on 07 Sep 2011, 12:49

13. SellPhones (unregistered)


I cannot provide a link as it was via an email...possible date for new policy is Sunday 10-2-11. I'm sure the Playbook will have more info on it in the coming weeks since it is not "official" yet.

posted on 07 Sep 2011, 09:47

4. PimpStrong (Posts: 310; Member since: 25 Jul 2011)


Sprint peaked within the last 10 years at $26 a share. So no I won't invest my $3 to MAYBE turn it into $6

posted on 07 Sep 2011, 16:49 1

17. Hey Pimp (unregistered)


would you buy stock at 26 to turn it into 52?

posted on 07 Sep 2011, 21:52

19. Phonecall01 (Posts: 106; Member since: 02 Apr 2009)


I think it will jump a few bucks if the iphone hits. Might be a quick buck opp as a short term invest. But you'd have to sell as soon as jumps a couple bucks to be on the safe side. I guess just enough to by an iphone at full retail... :)

posted on 07 Sep 2011, 21:53

20. Phonecall01 (Posts: 106; Member since: 02 Apr 2009)


...or GSII

posted on 07 Sep 2011, 09:57 3

6. SuperAndroidEvo (Posts: 3515; Member since: 15 Apr 2011)


That is exactly right, buy now & by spring or summer sell to make some ok money. Sprint is 3rd by default. Both AT&T & Verizon are mammoth. To make real money with Sprint stock it would have to get just as big as AT&T or Verizon. I don't think 1 phone will make that happen. So Sprint is a risky purchase, but Nokia that might be some good buying though.

posted on 07 Sep 2011, 10:03

7. Codename: Infamous (unregistered)


DoJ and FCC have taken steps to block the merger, if their stance does not change then the merger will not happen. Congress will not intervene to promote the merger. Second at 3.50 a share is small price for an investment that has no where to go but up even if it is not a drastic increase. With the merger failing, a possible sprint iphone, the move to LTE, and the deal sprint made to allow roaming on its wimax equals increased revenue from several sources.

posted on 07 Sep 2011, 10:44

10. snowgator (Posts: 3158; Member since: 19 Jan 2011)


Totally agree. If you are in the stock market to make quick money, you are in the stock market to get ulcers as well. If you buy stock, you better be able to take a little ride until the LTE plans on Sprint are set in stone. That will take a while. Sell before that, and you miss your window of most return.

I am not sure if the merger getting approved really tanks Sprint stock. It might take a little hit at the announcement, but there will be no mass exodus from Sprint to the new AT&T, so why would it fall further? If there is an exodus the other way from T-Mo consumers who are not interested to be on AT&T's plans, it helps Sprint's stock- again, over time. I think it is a good investment for a decent return over a couple years time.

posted on 07 Sep 2011, 11:54 1

11. remixfa (Posts: 13902; Member since: 19 Dec 2008)


The FCC has done no such thing. The DoJ is an arm of Obama and was acting on his behalf and that has been discribed by other sources as accurate.. It also has NO say what so ever in the FCC's decision. It was nothing more than political posturing.
Unless the FCC can find concrete proof that the industry will fall to a duopoly and that will be bad, it HAS to allow the merger. They have to go on presented facts and evidence, not gut feelings.

That and ATT was caught bribing 90% of the people involved in the final vote at the FCC.

You still have (my guess) 85-95% chance of the merger happening.

posted on 07 Sep 2011, 13:21

14. downphoenix (Posts: 2231; Member since: 19 Jun 2010)


if the merger happens then the FCC has failed us as consumers.

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