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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
Share Price: $5 (June 27)
Stock Performance This Year: 18%
Analyst Consensus: Sprint tops the list of stocks under $5 with the most "buy" ratings, at 14. Bullish firms include Piper Jaffray, JPMorgan, and Wells Fargo Securities. Another 13 firms have a "hold" rating on Sprint, while six analysts say investors should dump the stock. The average analyst price target of $5.50 implies potential upside of 10% from current levels.
Bullish Case: JPMorgan analyst Philip Cusick wrote in a June 22 research note that Sprint Nextel is "the stock in our universe with the largest potential upside due to its continued operational turnaround and opportunity to expand margins from the current industry-low level."
Cusick forecasts that Sprint won't see margin expansion until 2012 or 2013, but he says the company should be able to stabilize margins here given a stable top line. "We also expect solid cash flow generation, which should go to paying down debt or possibly further investment in the business or other strategic options," Cusick adds.
TheStreet Ratings rates Sprint a "sell," driven by a few notable weaknesses, including "generally weak debt management, disappointing return on equity and weak operating cash flow."
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-- Written by Robert Holmes in Boston.
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