An analyst upgrade sent shares of Sprint-Nextel
What's going on here?
Piper Jaffray analyst Christopher Larsen wasn't actually that sweet on Sprint in his report -- the upgrade was from "sell" to "hold," and his target price remains below the current trading level. But regarding Clearwire, he noted that Sprint should be able to get out of that problematic holding "in a non-detrimental fashion." Specifically, Larsen isn't worried about a Clearwire bankruptcy dragging Sprint into financial trouble and believes that "the situation will be resolved."
If that's not a backhanded compliment, I don't know what is. Larsen isn't actually saying anything nice at all about Clearwire, other than that its problems shouldn't crush Sprint. That's kind of like saying that Blockbuster's bankruptcy shouldn't harm the movie studios -- not exactly words that would inspire you to run out and buy shares of your favorite media stock.
It seems like investors are reading good news into this almost-an-upgrade where there is none, jumping to conclusions because they want so badly to believe that there's life left in Clearwire. But we're still talking about a company with severely negative gross margins and knee-deep in debt. Clearwire has failed to turn its temporary advantage of having the first quasi-4G network into cash results, and now AT&T
Sprint isn't the only company potentially damaged by a Clearwire implosion: Intel
There are plenty of reasons why 7.4% of Clearwire's shares are sold short, according to data provider Capital IQ. Clearwire is hanging by a thread and hoping for a miracle, and I'm only surprised the short positions aren't larger.
Add Clearwire to your Foolish watchlist to follow the company's probable descent.