"We are downgrading Sprint and have set a price target of $3.25 based on 5x our 2016 EBITDA estimate plus $17.5 billion of value for a possible sale of excess 2.5 GHz spectrum. We do not see a path by which Sprint can return to revenue growth, let alone EBITDA growth or positive free cash flow. Our 2016 EBITDA estimate is $2 billion below consensus," BTIG said.
Analysts also question whether SoftBank (SFTBY) has "lost interest" in making the investment necessary to make Sprint competitive. It is also not clear whether future consolidation with T-Mobile (TMUS) is still "a viable option," analysts noted.
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"We are tired of waiting and simply can't ignore the high cash burn rate and recent comments by Sprint's Chairman Masa Son and latest CEO Marcelo Claure that outlined a clouded network vision and market strategy that we do not believe offers a clear revenue growth opportunity," BTIG added.
"Sprint needs to stop burning cash in order to establish any equity value in the stock and to do that it needs to grow the subscriber base. We do not believe it can grow the subscriber base with price promotions alone," BTIG concluded.