Please ensure Javascript is enabled for purposes of website accessibility

Investors' Love/Hate Relationship with Sprint Stock

By Anders Bylund - Mar 18, 2015 at 9:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Maybe you love Sprint as a company, a service, and an investment. Maybe you hate it with a passion. But there's not much middle ground between the two extremes.

Sprint (S) is not in the habit of making investors fabulously wealthy. The stock has lost 42% of its value over the last year, destroying nearly $28 billion of shareholder value in the process.

On the other hand, Sprint stock is also losing most of its fiercest critics. Sprint currently enjoys the lowest level of short-selling interest since 2005, which means investors have largely stopped betting against the company's never-ending turnaround.

Where will Sprint go from here?
Let's start on the sunny side of the street.

SoftBank CEO and Sprint Chairman Masayoshi Son enjoys a lighthearted moment. Image source: Softbank.

Under the strategic leadership of SoftBank billionaire Masayoshi Son and his handpicked CEO, Marcelo Claure, Sprint runs a full-court press offense with heavy discounts chiefly meant to steal customers from AT&T (T -0.50%) and Verizon (VZ 0.36%).

And it's working. Sprint recently reported its first quarter of actual subscriber gains since 2012.

Looking ahead, the company aims to improve its much-lamented network quality. It's an expensive, absolutely necessary round of 4G LTE upgrades, with an eye toward buying a lot of new spectrum at the next major Federal Communications Commission auction in 2016.

In other words, Sprint investors must have nerves of steel and a long-term focus. The company is running an expensive and risky turnaround plan here. Then again, you could argue that every turnaround effort meets that description.

Sounds like a slippery slope!
We've already started sliding over to the dark side.

As I said, Sprint's subscriber growth plan relies on extremely low-cost plans. The idea is to overcome qualms about the subpar network with an irresistible deal. The network improvements are coming, but too slowly to make a difference in the short term.

The big risk is that Son might run out of patience with his largest American asset. If he takes his massive capital reserves and goes home, Sprint would be stuck up the asset-building creek without a financial paddle.

So a bet on Sprint is a bet on Son's global ambitions and on his patience with Sprint's slow progress.

Sprint really needs access to Son's massive cash reserves.

What it all boils down to
Given Sprint's sagging stock chart, many investors aren't willing to take that bet on Son's steadfast support. On the other hand, the lack of short-selling interest also means investors don't dare bet against it.

The depressed value of today's Sprint shares sets investors up for a huge rebound -- if the subscriber growth momentum continues for a few more quarters. I don't own any Sprint shares yet, but I've been interested for quite some time. If the stock sinks much further, and Son still shows no sign of leaving his pet project unsupported, then I might bite the bullet.

It's a risky bet, but one with a large upside. Where do you stand in this love/hate relationship with Sprint? Share your thoughts in the comments box below.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Apple and Verizon Communications. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sprint Corporation Stock Quote
Sprint Corporation
S
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$44.84 (0.36%) $0.16
AT&T Inc. Stock Quote
AT&T Inc.
T
$18.01 (-0.50%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
373%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.