4. Clueless on Clearwire
Note to Donna Jaegers and her telecom research team over at
: Switch to decaf asap.
We're not kidding. The
coverage by Jeagers was so jittery this week that we're still buzzing from it.
Check it out. Before the market opened on Tuesday, Jeagers downgraded Clearwire to neutral from buy -- but maintained her $3 price target -- on the heels of
decision to sell a 70% stake to
for $20.1 billion. Since Sprint owns 48% of the wireless data network, Clearwire shares had more than doubled in the three days prior to the deal's announcement, closing at $2.69 on Monday, on the belief that Sprint would use its cash infusion to beef up its control of Clearwire.
"With the sharp rise in CLWR's stock price, we think the stock could fall back slightly since Sprint does not need to take any near-term action to increase its holding in CLWR. Our $3 price target is still credible as the low end of a 'fair' price for CLWR, but it could take a year for any further movement on CLWR," wrote Jaegers in her note.
Fair enough. Jaegers told her followers to take some money off the table after one heck of a run-up in the stock. One can't fault her there. You don't go broke taking a profit and all that. Furthermore, she correctly stated in her analysis that Sprint will likely let Clearwire "twist in the wind" until it hits a cash crunch in mid-2013 --- a point reiterated in a
report Tuesday morning -- so there was no urgency for investors to pile into the stock.
At that point, she should have stopped working and put her feet up. Regrettably, the caffeine must have kicked in because soon after she proceeded to put her foot in her mouth instead.
Barely two hours from that initial downgrade and with the stock trading down to $2.30 -- right in line with her bearish call -- Jeagers published another note, upgrading the stock to a buy while still maintaining that same $3 price target.
"We issued a downgrade of CLWR when we were looking at the closing price of the stock at $2.69 and there was only 12% upside to our target. Now with the stock trading off so quickly, we are reinstating our BUY rating. We expect the stock to be volatile in the near term, but with S in a much stronger financial position with the Softbank investment we think there is more visibility of CLWR either getting funding to stay solvent, or being taken over by S in mid-to-late 2013," wrote Jeager in her second missive of the morning.
Wow! She issued a downgrade and then an upgrade in the same morning over a mere 39 cent move in the stock. That may be a world record. Talk about moves like Jagger, with moves like that, Jeagers gave us whiplash!
And that's why we suggest that next time Jeagers try a milder cup of java.