Sprint’s Stock Could Double as LTE Plans Spook Analysts

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Sprint’s (NYSE:S) stock tumbled to its lowest in almost two years after at least seven analysts lowered their estimates following the carrier’s investor meeting where it laid out a roadmap for the launch of its wireless LTE network. [1] Among others, Kaufman Brothers, Deutsche Bank (NYSE:DB), Collins Stewart, JP Morgan (NYSE:JPM) and Atlantic Equities all cut their ratings to Neutral or the equivalent while Raymond James cut its rating on the stock to Outperform from Strong Buy. Finally today the stock is getting some reprieve and has recovered a little over 5%.

At Monday’s close, the stock had fallen by 7.9% to end the day at $2.22, which is nearly half our $4.73 price estimate on this stock. This is in contrast to the broader market rising by around 3.5% which shows the extremely pessimistic mood towards this stock.

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See our complete analysis for Sprint stock here

Sprint Looks to Raise Debt for LTE Rollout

At its Oct 7th meeting, Sprint had said that it plans on taking additional debt to fund the rollout of their new higher-speed 4G LTE network by mid-2012. [2] It had also earlier announced unlimited data plans for iPhone users. [3]

We believe that if the company is able to lure iPhone users with its uncapped data plans and at the same time increase speeds and reduce costs by using its LTE network, the long term prospects of the company looks good. However liquidity concerns arising from excessive debt on its balance sheet will continue to be a major deterrent to its business, and should this strategy not pay off, Sprint could be in dire straits. (see Sprint Plunges on LTE Expansion Costs, May Tap Capital Markets)

Sprint also announced yesterday that it has sold out of pre-orders for both the white and black versions of the 16GB iPhone 4S. [4] It seems the market is unwilling to acknowledge this news in Sprint’s favor.

We believe this is either because of fears that the margins on the iPhone sales will not be good or that the debt overhang of the iPhone deal and the cost of the LTE upgrade will overwhelm any positives from the iPhone in the near term. (see Sprint’s Huge Bet on the iPhone Threatens to Sink Stock)

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. Sprint Drops as Analysts Reduce Ratings After Last Week’s Investor Meeting, Bloomberg, October 11th, 2011 []
  2. Sprint accelerates deployment of network vision and announces national rollout of 4G LTE, Sprint newsroom, October 7th, 2011 []
  3. Sprint Confirms It Will Offer Unlimited Data Plan for iPhone, AllThingsD, October 5th, 2011 []
  4. Sprint Sells Out of Entry-level iPhone 4S Models, CNet, October 10th, 2011 []