Why I like Sprint.
Why I like Sprint.
8 years, 1 month ago Posted in: Computers, News, Opinions, Slider 1

Sprint has been in the cell phone market since the beginning, and has done poorly in recent years.  Shares of Sprint (S) have declined from a value of $20 in 2006 to its current $5 price.  Despite past performance Sprint is easily worth $10 a share.  The main reason for this is that the book value is being overlooked.  They have seen customers leave by the hundreds of thousands, and their business accounts have been dropping as well.  The acquisition of Nextel has not generated the results that Sprint was hoping for back in 2004 when they paid 35 billion for the company.  To top it off Sprint suffers from a very high churn rate, or rate in which customers flock to other companies when contractual obligations are through.  This will result in the slow death for Sprint unless they get their game up to compete with the likes of AT&T and Verizon, the current top dogs.

The market is very focused on what this company has been doing in their latest years instead of the core value that they hold.  Right now the stock price is roughly half of its current book value or more accurately at .6 of Price/Book making them a strong value play.  There are three ways for this to play out.  Either another company could buy out Sprint which would generate an instant gain on the stock.  Another would be that they could increase their customer base and begin performing at the level they should.  And as long as they recover their business customers, increase performance across their networks, and understand why their customers are leaving, and adjust accordingly.  Then the world will start to see the value and the performance side of Sprint, and the stock will go up.  Counter to this argument is that they continue to loose business customers, loose focus on their customers, and continue to die a slow death.  This will slowly degrade the core value of its stock.  If this scenario play out then they are still a prime target for acquisition which keeps my estimates at its book value of around $10.

With new data options like the MiFi for their business customers, the Sprint EVO 4G which runs Droid and is arguably the best phone out there.  They will start to see their customers return.  AT&Ts poor service and Verizon’s poor phone options leave customers begging for another option.  And if my guess is that they just might have found it in Sprint.

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