After a brief stint on the sidelines, wireless renegade

Nextel

(NXTL)

is ready to rejoin the fray.

The company's shares bounced back this week after the fast-growing walkie-talkie shop sat out the costly

AT&T Wireless

(AWE)

auction. Now, with the Reston, Va., company due to post fourth-quarter earnings early Thursday, Wall Street's focus will return to Nextel's gift for growth.

The 2003 numbers themselves aren't likely to bring much in the way of surprises. Nextel has already briefed Wall Street, via last month's

release of preliminary fourth-quarter numbers. Attention will more likely turn on what, if anything, can help keep the air in its lofty stock valuation.

Nextel's plans look especially important in light of Cingular's landscape-reshaping buyout of AT&T Wireless. With the industry consolidating and rivals catching up on technology, some observers wonder where Nextel's premium-fetching advantage is going to come from. The shares, which doubled last year but have so far sat out 2004's wireless-industry renaissance, were flat Wednesday at $28.77.

Doing the Math

There's no doubt that Nextel has confounded the conventional wisdom in blazing a path through the industry. Despite striking some observers in the past as a mere high-tech cash fireplace, Nextel has succeeded in building a growing legion of fans with its loyal and lucrative subscriber base.

But as Wall Street continues to be awed by the shocking $41 billion merger plan between Cingular and AT&T Wireless, investors are growing more apt to pay attention to the relative value of players in the industry.

As one wireless industry number-cruncher points out, Cingular's rich deal makes each AT&T Wireless subscriber worth $1,860. Apply that per-subscriber value to Nextel and you'd be looking at a company worth $23 billion. Of course, that's $8.5 billion

below

Nextel's current market cap.

Still, fans will argue that by nearly every measure -- profit margin, customer loyalty, average revenue per user -- Nextel is far superior to industry laggard AT&T Wireless. How long bulls are willing to afford Nextel that premium depends on how convincing the company is about its prospects.

For the year, the nation's No. 5 wireless service had a strong performance, posting solid subscriber growth and its first-ever profit. The surge in business was also good for the stock, which is up more than 500% in two years.

But that's all in the rearview window. Now many investors question whether Nextel can sustain its momentum, as consumer giant Cingular and business-user favorite AT&T Wireless prepare to combine forces at the end of this year.

Nextel also faces more competition from

Verizon

(VZ) - Get Report

and

Sprint PCS

(PCS)

, which have edged in on Nextel's once-exclusive two-way radio service.

Fork in the Road

Nextel can take one of two strategic paths, says Deutsche Bank analyst Viktor Shvets. "They can survive alone by continuing to focus more on their market niche among professionals and trade users," says Shvets. Or Nextel can expand by buying more wireless spectrum or acquiring another player like Sprint PCS, he says.

Either way, Shvets doesn't think it will be a smooth road. He rates Nextel a sell based on its high valuation and intense market competition.

Nextel reports earnings before the market opens Thursday. Analysts are looking for a fourth-quarter profit of 40 cents per share on $2.9 billion in revenue. Looking ahead to the full year, analysts expect Nextel to post 16% top-line growth in 2004.

Nextel shares have sat out the wireless rally of 2004, trading at $28.67 at midday Wednesday. That's roughly flat with where it opened the year.