Sprint’s Stock Gains as Chairman Pledges Candidness on iPhone, LTE Strategy
Sprint’s (NYSE:S) stock zoomed 7% up yesterday after Chairman James Hance acknowledged the mistake the company had made by not disclosing the future costs of selling Apple’s (NASDAQ:AAPL) iPhone and added that the information will be revealed this month. [1] The stock had fallen for two successive days by almost 26% on worries that the company might have to add more debt to its already highly leveraged balance sheet to support its LTE launch plan before this news came. (see Sprint Plunges on LTE Expansion Costs, May Tap Capital Markets)
The stock is up another 10% today.
We believe this is a smart move, albeit a late one, by the company to clear the air on the uncertainty that was created in the Oct 7th investor meeting. There were reports that the iPhone would be dilutive to Sprint’s margins as a result of the higher related subsidies (see Sprint’s Huge Bet on the iPhone Threatens to Sink Stock). In fact, the markets were so pessimistic that the news that Sprint had sold out of pre-orders for the 16GB version of the newly launched iPhone 4S was ignored. Sprint has hopefully learned that being candid with shareholders will help remove a great deal of uncertainty and help build investor confidence in its big bet on the iPhone.
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Our $4.73 price estimate for Sprint’s stock is almost double the market price.
See our complete analysis for Sprint stock here
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- Sprint Will Reveal iPhone Impact to Fix ‘Mistake’, Chairman Says, Bloomberg, Oct 12th, 2011 [↩]