1. Sprint Nextel (S)
Company Profile: Sprint Nextel offers a range of wireless and wireline communications products and for individual consumers, businesses, government subscribers and resellers. The company has been touting its 4G wireless network, which it claims has faster data speeds and better reliability than those of rivals AT&T (T) and Verizon (VZ).Share Price: $4.78 (March 29) Stock Performance This Year: 13% Analyst Consensus: Sprint tops the list of stocks under $5 with the most "buy" ratings, at 13. A larger number of analysts, though, say investors should merely hold on to the stock, no doubt due to the uncertainty created by AT&T's proposed $39 billion buyout of T-Mobile USA. While 16 analysts have a "hold" rating, another five say investors should dump shares of the troubled wireless company. The average analyst price target of $5.25 implies potential upside of 14% from current levels. Bullish Case: Credit Suisse analyst Jonathan Chaplin has an "outperform" rating and $8 price target on Sprint, making the telecom provider one of the firm's Focus List stocks. Chaplin notes that he believed Sprint would merge with T-Mobile USA before AT&T (T) offered nearly $40 billion to acquire the business from Deutsche Telekom (DT). While strategic possibilities have diminished, Chaplin says his thesis is unchanged. "Sprint and T-Mobile compete for the postpaid value segment," Chaplin wrote in a March 20 research note. "Thus, consolidation should improve competitive dynamics for Sprint in the near term. Longer term, the entire industry could benefit from an improved industry structure." On the other hand, TheStreet Ratings rates Sprint a "sell" as it will be more difficult for investors to achieve positive results compared to other stocks the model covers. "The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally weak debt management," a March 20 research report notes. -- Written by Robert Holmes in Boston. >>To see these stocks in action, visit the Top 10 'Buy'-Rated Stocks Under $5 portfolio on Stockpickr.
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