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Sprint shares fall after analyst downgrade

Wed, 12/09/2009 - 7:10am
The Associated Press

LOS ANGELES (AP) – Sprint Nextel Corp. shares fell Tuesday after an analyst downgraded the telecommunications carrier, saying even at relatively cheap share prices, the stock isn't a good bet because earnings are in "perpetual decline."

Pali Research analyst Walter Piecyk cut his rating on Sprint shares to "Neutral" from "Buy" and removed his share price target of $7.50.

Sprint shares fell 23 cents, or 5.5 percent, to $3.95 in afternoon trading. The stock has ranged from $1.83 to $5.94 over the past year.

"Sprint's stock is not expensive ... but with [operating profit] in perpetual decline and capital spending at a low, a valuation call is difficult to defend," he wrote.

While the carrier has made progress in slowing the loss of regular subscribers, Piecyk said the rate of change and cost cutting would not help reverse falling profits.

He also said prepaid plans, which have been growing for Sprint, have been hurt by price competition. He expects the net addition of prepaid customers to fall by 25 percent next year compared with a year earlier.

Piecyk expected consolidated earnings before interest, taxes, depreciation and amortization in 2010 of $5.8 billion, with the wireless portion of that falling 9.5 percent to $4.6 billion.

More Broadband Direct 12/09/09:
•  ADB scores industry 1st at CableLabs interop
•  Time Warner Cable to Comcast: Integration not easy
•  AT&T hits 2M-customer milestone for U-verse
•  AT&T: Tighter control of cell data usage ahead
•  Big networking cos. band to solidify the cloud
•  Study: Mobile TV in demand
•  NetScout improves mobile service monitoring
•  Sprint shares fall after analyst downgrade
•  Analyst eyes Motorola break-up scenario; shares up
•  Broadband Briefs for 12/09/09

 

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