Analyst: Clearwire 'too strategic to fail'

Mon, 12/14/2009 - 7:55am
The Associated Press

NEW YORK (AP) – An analyst upgraded Clearwire Corp. on Friday to "buy" from "sell" and put an $8 price target on shares of the wireless data network company, citing its recent capital raise and expectations of subscriber growth.

The shares were up 18 cents, or 3.1 percent, to $6.02 in Friday afternoon trading.

Soleil Securities analyst Michael Nelson said he estimated the company will add a net 90,000 new subscribers in the fourth quarter of 2009, to about 645,000 for the year.

Nelson said he expects the subscriber base to grow to 4.43 million in 2012, representing a compounded annual growth rate of 90 percent.

Last month, Clearwire also announced it had received $1.56 billion in new equity and refinanced $1.4 billion in debt. Its main investor, wireless carrier Sprint Nextel Corp., boosted its ownership stake to 57 percent. Other investors include Comcast Corp., Time Warner Cable Inc., Bright House Networks and Intel Corp.

"We believe Clearwire has become too strategic to fail," Nelson wrote.

Nelson noted the company, based in Kirkland, Wash., now has $4.8 billion in cash and $2.8 billion in outstanding debt, which should allow it to accelerate the build-out of the next-generation wireless broadband network.

He argued that the better financial position should get investors focused on its increasing subscriber base rather than its losses.

"As an early stage company, we believe Clearwire will continue to be a milestone story with investors likely to focus on top-line subscriber growth despite increased cash burn," he wrote.

Nelson said the value of Clearwire's wireless spectrum should also increase over time as it becomes a scarce resource.

He expected a rally in the company's shares before the release of the company's fourth-quarter earnings report some time early next year.

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