Collins Stewart Maintains a 'Hold' on Sprint (S); AT&T (T) Acquires T-Mobile USA for $39 Bln
S Hot Sheet
Rating Summary:6 Buy, 14 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 8 | New: 25
Collins Stewart maintains a 'Hold' on Sprint (NYSE: S), PT $4.50.
Collins analyst says, "With this announcement it is clear that Deutsche Telekom (NYSE: DT) is not about to merge with Sprint (NYSE: S) (as many had recently speculated) or even create a network sharing agreement that would lower the costs of their respective 4G deployments. Although the announcement clearly pushes Sprint and Clearwire closer together, making Sprint appear more expensive (nearly 8.0x 2012 Est. PF EBITDA), we also note that it likely eliminates a likely wholesale customer or even purchaser of the 20Mhz of Clearwire (Nasdaq: CLWR) spectrum that had actively been shopped. For LightSquared, it simply eliminates the single most likely anchor tenant for its yet-to-be built wireless network which could jeopardize its entire business model. In the near-term, we expect virtually no impact upon Verizon (NYSE: VZ) but over time the lower levels of competition should make this proposed merger a net positive for its shareholders."
"Our priced target of $4.50 implies 5.3x estimate 2012 EBITDA. With the stock currently trading at 5.3x 2012 EBITDA and with a 21% free cash flow yield, the stock appears inexpensive. However, with wireless margins unlikely to significantly improve in 2011 and even 2012, and with the Verizon iPhone (Nasdaq: AAPL) launch and the continued momentum of the iPhone at AT&T (NYSE: T), we still find Sprint between a rock and a hard place.
For more ratings news on Sprint click here and for the rating history of Sprint click here.
Shares of Sprint closed at $5.05 yesterday, with a 52 week range of $3.62-$28.00.
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Collins analyst says, "With this announcement it is clear that Deutsche Telekom (NYSE: DT) is not about to merge with Sprint (NYSE: S) (as many had recently speculated) or even create a network sharing agreement that would lower the costs of their respective 4G deployments. Although the announcement clearly pushes Sprint and Clearwire closer together, making Sprint appear more expensive (nearly 8.0x 2012 Est. PF EBITDA), we also note that it likely eliminates a likely wholesale customer or even purchaser of the 20Mhz of Clearwire (Nasdaq: CLWR) spectrum that had actively been shopped. For LightSquared, it simply eliminates the single most likely anchor tenant for its yet-to-be built wireless network which could jeopardize its entire business model. In the near-term, we expect virtually no impact upon Verizon (NYSE: VZ) but over time the lower levels of competition should make this proposed merger a net positive for its shareholders."
"Our priced target of $4.50 implies 5.3x estimate 2012 EBITDA. With the stock currently trading at 5.3x 2012 EBITDA and with a 21% free cash flow yield, the stock appears inexpensive. However, with wireless margins unlikely to significantly improve in 2011 and even 2012, and with the Verizon iPhone (Nasdaq: AAPL) launch and the continued momentum of the iPhone at AT&T (NYSE: T), we still find Sprint between a rock and a hard place.
For more ratings news on Sprint click here and for the rating history of Sprint click here.
Shares of Sprint closed at $5.05 yesterday, with a 52 week range of $3.62-$28.00.
Discover Wall Street's best ratings calls with the pros - Ratings Insider Elite. Free Trial!
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