Over the past month, Sprint's (S +0.00%) stock has lost just over 20% of its value. That downward trend has left investors in a precarious position, wondering whether the company can get back on track and turn the stock around.
Let's take a quick look as to why Sprint's shares have seen such a violent pullback, and whether or not the company can bounce back from its tumble.
Not much to be thankful for
Sprint's drop started when the company released its fiscal second quarter earnings at the beginning of the month. The company missed Wall Street's already low expectations, and in after-hours trading the stock was down 7% and hasn't turned around since.
Source: YCharts
Analysts were expecting a $0.06-per-share loss for the quarter, while Sprint lost $0.19 per share. As if that weren't bad enough, the company lost a total of 272,000 postpaid subscribers in the quarter.. Sprint said phone customers left the carrier in part because of the "adverse impacts to the customer experience resulting from its comprehensive network upgrade" over the past few quarters. Essentially, Sprint has been upgrading its old network, which has resulted in poor service for some of its customers.
That wasn't all the bad news though. Sprint also announced it's cutting 2,000 jobs in an effort to decrease spending by $1.5 billion. The job cuts will save Sprint $400 million on an annualized basis.
Then Sprint kept the good times rolling by announcing it was cutting its 2014 adjusted earning forecast from $5.8 billion to $5.9 billion, down from $6.7 billion to $6.9 billion.
All in all, it hasn't been a great month (or previous quarter) for the company.
Looking ahead
Despite all the bad news, there are a few things Sprint investors should be pleased with.
First, while phone subscribers dropped significantly, it was less of a drop than the two previous quarters. And in the month of September postpaid phone losses slowed by 60%.
The company's also tightened its credit requirements for customers, which should help reduce involuntary churn rates (when customers leave the company because they can't pay for the service) going forward. The benefits of this move won't be felt for three to six months, according to Sprint's management. .
But the biggest change for Sprint is in the strength of its new network. While many customers left Sprint because of poor network quality over the past few quarters, the new updated network should help the company eventually gain new customers.
"Customer perception of our network hadn't caught up with the actual performance improvement we've delivered," Sprint's new CEO, Marcelo Claure, said on the earnings call. This doesn't mean the company will snatch up hundreds of thousands of customers in the next quarter, but it should help Sprint start moving in the right direction.
Investors should consider that Sprint is on a very long road to recovery and that it's taking the right steps to make its turnaround a reality, particularly with its network upgrades. A RootMetrics survey said that although Sprint's network finished in last place earlier this year, the company's position "could be short-lived" as Sprint upgrades to its tri-band Spark network.
It wasn't all that long ago T-Mobile's network held last place in RootMetrics' network performance survey, so there's certainly hope Sprint can stage its own comeback as well.
