Sprint Corporation (S) Stock Rating Dowgraded Due To Limited Upside

Sprint Corporation (S) Stock Rating Dowgraded Due To Limited Upside
By Sprint Nextel [Public domain], via Wikimedia Commons

The stock rating of Sprint Corporation (NYSE:S) was downgraded to Market Perform by Colby Synesael, an analyst at Cowen & Co based on his belief that the shares of the third largest wireless carrier in the United States has limited upside even if Softbank Corp (OTCMKTS:SFTBF) (TYO:9984) succeeded in its bid to acquire T-Mobile US Inc (NYSE:TMUS).

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Sprint’s merger with T-Mobile unlikely to receive regulatory approval

Softbank Corp (OTCMKTS:SFTBF) (TYO:9984), the majority owner of Sprint Corporation (NYSE:S) was reportedly considering submitting a takeover bid for T-Mobile US Inc (NYSE:TMUS) during the first half of 2014, and it is evaluating possible regulatory hurdles.

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The analysts suggested that Sprint Corporation (NYSE:S) might face another bidding competition against Dish Network Corp (NASDAQ:DISH) to acquire T-Mobile US Inc (NYSE:TMUS) given the fact that the two companies had the same takeover target in the past. Sprint and Dish competed in acquiring Clearwire Corp (NASDAQ:CLWR) last year. The wireless carrier won the bidding process.

Synesael believed that the proposed merger of Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) is slightly negative. He emphasized that the regulatory approval /integration risk is immediately negative. He also considered the fact that the spectrum/cost synergies would ultimately become positive.

The analysts believed that the United States Department of Justice (DOJ) and the Federal Communications Commission (FCC) would reject Sprint’s merger with T-Mobile because it would reduce the competition in the wireless industry.

Synesael said, “We believe the likelihood of the deal receiving DOJ/FCC approval under the current administration is un-shockingly unlikely.”

Sprint’s top investors aim to give stock a level of stability

The analysts noted that 86% of shares of Sprint Corporation (NYSE:S) are owned by its top five stockholders including Softbank Corp (OTCMKTS:SFTBF) (TYO:9984). According to him, “We believe these investors are largely committed to the long-term vision of Sprint and give shares a pronounced level of stability, but also reduces liquidity for other investors.”

The stock price of Sprint Corporation (NYSE:S) has surged more than 90% since July compared with the 12% gain of the S&P 500. The shares of the company went up by 32% since December 12 compared with the 4% rise of the index. According to Synesael, it is unlikely for the stock to experience additional upside in the near or mid-term.

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Marie received her Bachelors Degree in Mass Communication from New Era University. She is a former news writer and program producer for Nation Broadcasting Corporation (NBC-DZAR 1026), a nationwide AM radio station. She was also involved in events management. Marie was also a former Young Ambassador of Goodwill during the 26th Ship for Southeast Asian Youth Program (SSEAYP). She loves to read, travel and take photographs. She considers gardening a therapy.
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  1. Well, remember… Sprint needs to figure out how to sell $20,000,000,000.00 worth of Apple iPhones.

    That contract was signed before Steve Jobs forgot to take his medicine and died. So, with the lack of innovation at Apple, and Sprint having that obligation, eliminating a national competitor is the best way Sprint can meet the Apple Contract Quotas; which helps Apple stock.

    I don’t believe the FCC has much choice in the matter because former Vice President, Al Gore (who has a lot of political pull), is on the board of directors at Apple.

    Also, it may make sense for Sprint to shed assets. Maybe they can sell “Virgin Mobile” to Verizon. It’s a very fun brand; and Richard Branson will probably have quite a bit of fun at Verizon.

    But when you think of it, it makes perfect sense– the more networks Sprint owns, the faster Sprint can meet their Apple contract and quota.

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