2-Star Stocks Poised to Plunge: Sprint Nextel?

By Brian D. Pacampara
November 25, 2009 | Comments (8)

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Based on the aggregated intelligence of 145,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, telecom giant Sprint Nextel (NYSE: 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.

Sprint facts

Headquarters (Founded)

Overland Park, Kan. (1899)

Market Cap

$10.56 billion

Industry

Wireless communications

Trailing-12-Month Revenue

$32.82 billion

Management

President/CEO Daniel Hesse
CFO Paget Alves

Return on Equity (Average, Past 3 Years)

(35%)

1-Year Return

71%

Competitors

Verizon Communications (NYSE: VZ)
AT&T (NYSE: T)

CAPS Members Bearish on S Also Bearish on

Ford Motor (NYSE: F)
Citigroup (NYSE: C)

CAPS Members Bullish on S Also Bullish on

Apple (Nasdaq: AAPL)
General Electric (NYSE: GE)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 23% of the 1,804 members who have rated Sprint believe the stock will underperform the S&P 500 going forward. These bears include shaileshnita and stockfreak1.

Earlier this year, shaileshinta reminded our community that Sprint "has been in the red for the past 3 years." Our CAPS member continues: "Additionally, its revenue is declining from one quarter to another. It also has a huge debt. ... It has negative Return on Assets/Equity."

In a pitch from last week, stockfreak1 also advised Fools to sprint away from the stock:

The technical edge of 4G and Sprint's announcement of addressing their balance sheet is driving the share price. On its face, however, the company has 2 strikes against it. In a recovering recession it appears their target customers are higher income service-oriented clients. Having a glance at their service plans not only does [AT&T] match them, but has more value for the middle market. Secondly, competition is becoming more fierce and I see problems for all major carriers as they will be encroached by the minor carriers soon and stuck with possible massive debt.

What do you think about Sprint, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started!

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Sprint is a Motley Fool Inside Value pick, and Apple is a selection of Stock Advisor. The Fool's disclosure policy always gets a perfect score.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 25, 2009, at 11:45 AM, joemomsbroker wrote:

    Actually, the plan pricing is quite the opposite.

    Sprint's basic 450min (plus unltd 3G and text) is $20 cheaper per month than AT&T's basic $450 min plan. Not to mention you get premium features such as Free calling to ANY cellphone in the US, GPS Nav, Mobile TV, and Blackberry Int. Svc.

    Furhtermore, Sprint operates and maintains the US fed govt's surveilance network, as well as being a Tier 1 IP, part of the world-wide internet backbone.

    I just don't see S going anywhere, anytime soon.

  • Report this Comment On November 25, 2009, at 12:53 PM, BBGuy01 wrote:

    Hey Fool Editors,

    Maybe you should get the facts straight about a company before you bash them. The CFO of Sprint is Bob Brust. Paget Alves is the President of their BMG group. You guys need to quit feeding the short sellers and the trolls.

    AT&T's services cost much more then a comparable plan with Sprint. All you need to do is take a look at both companies web sites to figure that one out.

  • Report this Comment On November 25, 2009, at 1:05 PM, rukiddingme60 wrote:

    Such a helpful article. I've been eager to learn what 1,800 anonymous people who happen to have internet access think about Sprint stock. Especially Stockfreak1, given that he/she/it is so well regarded in the investment community.

  • Report this Comment On November 25, 2009, at 2:04 PM, Networker50 wrote:

    I agree, get your facts straight. Sprint plans are more affordable by a long margin for comparable ATT plans. Sprint has a larger 3G footprint and 4G is going to be way ahead of ATT, just look at their 3G footprint. The big question is will people start moving to Sprint in larger numbers. With all the misinformation out there it makes that more difficult. Some fact checking please?

  • Report this Comment On November 25, 2009, at 2:06 PM, 1Maximus1 wrote:

    Gang, I'll keep my comment short-and-sour? Their debt load permiates all other considerations. I predict S will be carved-up by Thanksgiving Day 2010, and sold off in parts to a mix of telecoms and Middle East VC's. (A Dubai-based VC was giving S the once-over in 2008)

  • Report this Comment On November 25, 2009, at 4:05 PM, AurionPendragon wrote:

    This is exactly why people don't even read Fool articles anymore.... I would recommend his editorial status be revoked.

  • Report this Comment On November 26, 2009, at 4:57 AM, MSgtWheels wrote:

    Hey "Fools"! Instead of relying on some no name to put a smack down on a company why don't you do your own research and then be man enough to stand behind what you write?

    I'm done wasting my time, delete my account as I've deleted you from my system.

  • Report this Comment On December 02, 2009, at 1:07 AM, cashman09 wrote:

    I might add that both ATT and Verizon are carrying the majority of legacy long distance and local business in this country ...a revenue stream that is plummeting towards zero and will likely be disintegrated in the next few years! Additionally, the iphone has artificially propped up AT&Ts business for years ! Remove that one trick pony ...and they would lose customers in droves!

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