Sprint Nextel (S) shares are getting some support this morning from Raymond James analyst Ric Prentiss, who raised his rating on the shares to Outperform from Market Perform, setting a $6 target price. The shares closed yesterday at $4.15.
Prentiss writes that Sprint’s “ability to stabilize and grow revenues and EBITDA should benefit from several trends noted on the [the company's] Q1 earnings call:”
- U.S. economy is stabilizing and showing early signs of improvement.
- Industry response to weak post-paid adds appears focused on reducing churn, growing ARPU and improving margins as opposed to adding subs at any cost.
- Industry pre-paid growth is strong, and fears of new, disruptive pricing plans did not materialize.
- CDMA operators are poised to make a big splash with 4G market launches and new devices.
“Sprint has been losing post-paid subs since Q3 2007 with an associated decline in EBITDA,” he notes. “With the economy showing early signs of life, and competition, while still intense, being rational, the table is set for a turnaround at Sprint.”
Also no doubt aided the shares: a strong early reception for Sprint’s first 4G phone the HTC EVO; the company yesterday said the device will go on sale June 4 at $199.99 with a two-year contract.
S today is up 16 cents, or 3.9%, to $4.31.
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