2-Star Stocks Poised to Plunge: Sprint Nextel?
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, telecom giant Sprint Nextel (NYS: S) has received a distressing two-star ranking.
With that in mind, let's take a closer look at Sprint's business and see what CAPS investors are saying about the stock right now.
|Headquarters (Founded)||Overland Park, Kan. (1899)|
|Market Cap||$7.7 billion|
|Trailing-12-Month Revenue||$33.1 billion|
|Management||CEO Daniel Hesse (since December 2007)|
CFO Joseph Euteneuer (since April 2011)
|Return on Equity (Average, Past 3 Years)||(17.7%)|
|Cash/Debt||$4.3 billion / $18.5 billion|
AT&T (NYS: T)
Verizon (NYS: VZ)
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 19% of the 2,360 members who have rated Sprint believe the stock will underperform the S&P 500 going forward. These bears include fellow Fool Anders Bylund (TMFZahrim) and TSIF, both of whom are ranked in the top 20% of our community.
Perhaps Sprint shifted network gears to make itself more compatible with the competition, painting takeover crosshairs on its own back. Or maybe this Hail Mary strategy shift is exactly the misguided comeback attempt that it looks like. Unfortunately. I think that Sprint presented this plan with a perfectly straight face.
Sprint even sports an alarming debt-to-equity of 139.1%. That's much higher than that of industry peers like AT&T (58.3%), Verizon (59.5%), and Vodafone (NAS: VOD) (43.7%).
CAPS member TSIF elaborated on the bear case on October 8:
Sprint Nextel Corp had an interesting trading day this past Friday (7 October 2011). What started as a lovefest over Sprints agreement to start selling the new Iphones ended in a dumpfest as Sprint continued speaking when they should have gone quiet. Their statement that they would need to raise additional capital in 2012 to fund the independent 4G buildout, (separating from Clearwire) gave pause to investors who were already unsure how much, or how soon Sprint could capitalize from Iphone. It's a difficult formula to determine a cash flow from. ...
Sprint overall doesn't show any near term signs of being able to satisfy investors and the rough economy will just add to the distress, giving me some margin from "bargain hunters" bidding this one back up when sentiment is higher.
P/B remains sub-1 implying a possible discounted share price, but margins remain negative and Sprint posted a loss of $3 Billion last year. (And over $2B in 2009 and 2008). ... Treating your partners, like they did Clearwire on Friday is also not a recipe for long term success.
What do you think about Sprint, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of AT&T and Vodafone. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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