Tuesday morning, cell phone company Sprint Corp. (NYSE: S) came out with earnings that impressed Wall Street. This gave relief to shareholders, which saw their shares increase 6% during morning trading. However, Sprint shares are still down 12% year to date, versus a 54% increase for T-Mobile shares.
On a short-term basis, it is about beating Wall Street expectations. People getting into Sprint shares now may catch a turnaround wave that may translate into a significantly higher share price. In contrast, T-Mobile US Inc. (NYSE: TMUS) shares may have reached most of their potential for the time being, based on Wall Street estimates.
Sprint now sees an improving customer base along with T-Mobile. Sprint saw total net additions of 675,000, versus net losses of 220,000 the same time last year. This stems from the fact that Sprint lost fewer postpaid and, to a lesser extent, prepaid phone customers. Sprint’s wholesale net additions improved to 731,000 from 503,000 the same time last year, according to its latest earnings announcement.
Moreover, Sprint keeps a tight lid on expenses, which offset its steep decline in revenue of 9%. As a result of the added optimism, it boosted its adjusted EBITDA outlook for fiscal 2015 from “$6.5 to $6.9 billion to a range of $7.2 and $7.6 billion.” Sprint’s capital expenditure outlook remains at $5 billion.
T-Mobile kept its adjusted EBITDA the same in the range of “$6.8 to $7.2 billion.” However, the company boosted its branded postpaid net customer addition outlook to “3.4 and 3.9 million” from “3.0 to 3.5 million.” T-Mobile kept its capital expenditures outlook the same for its fiscal 2015.
Wall Street sees Sprint stock price as having a great deal more room to run. Sprint has a mean target price of $7.28 per share, which represents a whopping 106% potential return. T-Mobile has a mean target price of $42.95 per share, which represents a mere 3% potential return.