3 Reasons to Sell Sprint Nextel Today

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The turmoil in the markets makes it too easy to justify selling any stock these days. Yet, while panic never helps investors, it's still a good idea to play devil's advocate with investments.

Consider wireless carrier Sprint Nextel (NYSE: S  ) . Though the company has shown some dramatic improvements lately, you'll find a few of the 1,810 Motley Fool CAPS members weighing in on the company offer reasons to be bearish.

Here at the Fool, we like to consider both the good and the bad sides of an investment, so I'm highlighting three of the main bearish arguments on Sprint Nextel today. Be sure to read the bullish side as well, and then weigh in with your own comments below or rate Sprint Nextel in CAPS.

1. Getting squeezed
While both Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) tacked on more subscribers in the third quarter, Sprint Nextel, like T-Mobile, saw its subscriber count drop. Losing subscribers has become a trend for Sprint, and many CAPS members have little confidence that current efforts will be enough to turn it around. Regardless of gains in the prepaid space, many argue that Sprint still has to stop the bleeding on the postpaid end.

2. Lacking profits
AT&T has benefitted from the Apple (Nasdaq: AAPL  ) iPhone, and Verizon looks for a boost from Motorola's (NYSE: MOT  ) much-anticipated Droid and a new version of the Blackberry Storm from Research In Motion (Nasdaq: RIMM  ) . But Sprint has had trouble finding a catalyst to capture consumer mindshare and bring the company back to profitability. Its recent third-quarter loss added to a string of losses, leaving some CAPS members bearish on its ability to get out of the red.

3. Debt load
Sprint's balance sheet is stacked with debt and it continues to invest money in Clearwire (Nasdaq: CLWR  ) , which it is relying on for its 4G expansion. Standard & Poor's recently warned that it may cut Sprint's credit rating due to its weak performance this year, and many investors echo the same concerns as the company faces a challenging environment.

To see details of what CAPS members are saying now about Sprint Nextel, just click on over to Motley Fool CAPS and have a look -- or add your own thoughts directly to this story in the comments box below.

The Motley Fool Inside Value team looks for beaten down stocks that are selling at bargain prices well below their intrinsic value. To see the full list of cheap companies the service is recommending today, take a free 30-day trial.

Fool contributor Dave Mock votes three to be the number of the day. He owns shares of Motorola. Apple is a Stock Advisor recommendation. Sprint Nextel is an Inside Value pick. The Fool's disclosure policy landed a great side gig wearing a hot dog suit.

Read/Post Comments (8) | Recommend This Article (6)

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 December 11, 2009, at 11:00 AM, Fool wrote:

    Simply written with no bussiness sense or intelligence.

    Best regards,

  • Report this Comment On December 11, 2009, at 11:01 AM, Fool wrote:

    Simply written with no business sense or intelligence.

    Best regards

  • Report this Comment On December 11, 2009, at 1:21 PM, Aryabod wrote:

    Well put, simply written with no business Acumen or Intelligence.

    Let counter all three arguments. The iPhone had its day, only because it had no competition. Sprint's original riposte was to challenge it with a non-contender, the Instinct from Samsung, and it failed miserably. However that is no longer the case, Sprint now has a formidable arsenal of contenders, each with their own merits and each possessing weapons the iPhone 3GS lacks. The Hero has a 5MP camera, it multifunctions and uses the Android OS. The Samsung Moment has an AM-OLED screen, multifunctions, has a good qwerty keyboard and uses Android. The Palm Pre has flash on its camera, has a qwerty keyboard and multifunctions using the WebOS. All these phone have interchangable batteries whereas the iPhone doesn't. The Droid from Motorola as we all know is also nothing better than any of the aforementioned phones, it is just another VZ phone coupled with our typical VZ spin.

    Issue #2 was lacking profits. Well true, however the company had close to $870 million in Free cash flow and recently let go of another 2500 employees that should save it, according to mgmt, another $350 million a year. Sprint has been taking advantage of the current recession and ridding itself of its Legacy costs like many other companies.

    Issue #3 is debt. Well before you go too far just look at ATT, Verizon, DT, and the other Telcos before you make any conclusion as to Sprint's debt. Its debt is nothing to fear. With Free cash flow of approx. $3 Billion Sprint could wipe itself free of Debt within five years. I don't think most businesses could do that. Last but not least, Sprint's investment in Wimax (4) is IMHO very prescient, especially when you consider that most of the future growth in ARPU will be coming from data, and this is where Sprint shines. They with their subsidiary Clearwire practically own most of the 2.5Ghz spectrum which they are using for their Wimax. By the end of next year Sprint 4G POPs should exceed 130 million POPs from their current 30 million. According to Clearwire they just recently raised $4.2 billion, which will guarantee which should put to rest their any doubts as to Wimax's success. It is here and it is the only game in town.

    Regarding LTE: by the time LTE comes to market Wimax will have evolved from the IEEE 802.16e to 802.16m which will silence those that advocate LTE over Wimax. Proof of which can be had by Googling 802.16m.

    Sprint's Spectrum alone is worth more than $20 billion, it has $6 billion in cash and close to $3 billion in cash flow. It is only a matter of time before the stock pops.

  • Report this Comment On December 11, 2009, at 10:56 PM, dragracerdad wrote:

    My question remains... if Sprint is a three legged dog, is ClearWire the same crippled animal. I've held Sprint 3 times this year and always releasing for a nice pocket of folders. Not that Sprint is an awsome company but they have a habitual cycle. Knowing this it's nice to pick up a few bucks periodically. I see Clearwire splitting off of Sprint (due to massive debt)to DT and letting DT run the 4G movement here in the US. In the Chicago market nobody can compete with Verizon... but a 4G network could level the field a bit. Just my thoughts

  • Report this Comment On December 11, 2009, at 11:46 PM, Rushster wrote:

    @Aryabod-lots of big fancy words to confuse the fact that Sprextel has been a losing venture for at LEAST 3yrs. Not having a net+ flow of customer growth since then is NEVER good. LTE will be fully deployed next year (not in spurts like the Sprextel "employee" Clearwire has taken years to do-yes, we're talking Nexnet technology as well) by the larger carriers & will more than eclipse anything Sprextel comes out with.

  • Report this Comment On December 12, 2009, at 12:32 AM, Aryabod wrote:

    @Geddy/Rushster there are no fancy words, however for an ignorama like yourself they might appear to be fancy. Words are what they are so long as they are apropos and germane to the subject at hand. BTW most people in my 11th grade including my teacher agree with my conclusion and they had little difficulty understanding the facts.

    LTE will not be fully deployed next year as much as VZ would like us to believe, however they will begin to deploy their LTE network next year. Wimax kills anything and everything VZ has to offer, yes even spinmasters like yourself can't deny that unless you want to make a fool out of yourself. VZ's LTE, when fully deployed in 2012, will have to contend with Wimax 802.11m, which has 300Mbs to 1Gbs data download speeds. Now what do you have to say to this? DAAAAAAAAAAAA

    Once you Google this it might passify you for a while and keep your paymasters at VZ on their toes.

  • Report this Comment On December 12, 2009, at 11:19 AM, Fool wrote:

    I'm done reading The Motley Fool. The articles seem to be written with no complete research on the companies; just opinion.

  • Report this Comment On December 12, 2009, at 11:31 AM, Momentum21 wrote:

    I own Sprint at 3.60 but it is in my best interest to constantly look at the other side of the story...there are many issues with Sprint that make it risky but this is also why you can find more upside if you are willing to assume the added risk.

    So take these pieces for what they are the blogs and analyst opinion...subscribe a service if you want the scoop without doing all of the DD yourself.

    MF offers a very good series of newsletters (Inside Value would tell you all you need to know about the risk/reward of Sprint) but there are many others too.

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