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

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

When you purchase through our sponsored links, we may earn a commission. By using this website you agree to our T&Cs.

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).

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.

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.

Our Editorial Standards

At ValueWalk, we’re committed to providing accurate, research-backed information. Our editors go above and beyond to ensure our content is trustworthy and transparent.

Marie Cabural

Want Financial Guidance Sent Straight to You?

  • Pop your email in the box, and you'll receive bi-weekly emails from ValueWalk.
  • We never send spam — only the latest financial news and guides to help you take charge of your financial future.