Big Downgrade Implies More Downside for Sprint Shares

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Sprint Corp. (NYSE: S) is the wireless carrier that just cannot seem to catch a break. A failed merger attempt with T-Mobile and a four-way price war that included AT&T and Verizon just makes for a bad year. Now the wireless carrier’s shares hit a year low after a key analyst downgraded its shares.

Sprint’s equity rating was lowered to Underperform from Neutral by Macquarie, which is an implied “sell” rating at most other firms. Its price target also was downgraded to $5.00 from $6.50 in Macquarie’s call. The firm had lowered its rating to Neutral from Outperform last October in a note in which the firm was throwing in the towel.

With Sprint having scheduled its earnings announcement for Friday, February 2, 2018, this call does not bode well for what the company may say along with its results.

Despite Sprint’s stock having been above $9 when it was the subject of a merger, those shares fell roughly 30% in 2017, and the stock was last seen down almost 10% so far in 2018. As far as how that Sprint performance looks on a relative basis, the S&P 500 rose about 19.4% in 2017 and was already over 5% higher so far in 2018.

The analyst, Amy Yong, sees Sprint caught between a multiyear turnaround and a lack of strategic options for the near term. Yong also noted that Sprint seems to have lost subscribers to T-Mobile and even to Comcast.

There are still some positive issues surrounding Sprint so far in 2018. The company recently announced a multiyear business partnership with Cox Communications as a part of a patent litigation. There also were reports in mid-January that majority owner Softbank was considering an equity listing of its telecom business activities, but that may not include Sprint, considering the topic was mostly about Japan.

Softbank has continued acquiring Sprint shares in 2018. The latest 1.011 million share purchase on January 17 put Softbank’s direct and indirect ownership at more than 3.39 billion shares, out of an outstanding share count of 4 billion shares.

Unfortunately for Sprint, the failed merger of 2017 and the dismal stock performance landed CEO Marcelo Claure on the 24/7 Wall St. list of the 20 worst CEOs of 2017.

Sprint shares closed down 2.7% at $5.32 on Monday, and its stock was initially indicated down 0.5% more at $5.28 in Tuesday’s premarket trading. Its shares were last seen down 1.4% at $5.24 in midday trading on Tuesday.

Sprint’s 52-week range was $5.24 to $9.65 coming into the call, but its shares hit a new 52-week low of $5.10 on Tuesday morning. Its consensus analyst price target in the Thomson Reuters sell-side universe was listed as $5.88.

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