With shares of Sprint Nextel (NYSE:S) trading around $7, is S an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Sprint Nextel offers a range of wireless and wireline communications products and services to individual consumers, businesses, government subscribers, and resellers. The company offers wireless and wireline voice and data transmission services to subscribers in all 50 states, Puerto Rico, and the United States Virgin Islands under the Sprint corporate brand, which includes its retail brands of Sprint, Nextel, Boost Mobile, Virgin Mobile, and Assurance Wireless. An increasing number of consumers are looking for improved ways to stay connected with friends and family. As the mobile expansion trend continues, look for Sprint Nextel to see growing profits.
T = Technicals on the Stock Chart are Mixed
Sprint Nextel stock has been hit with a significant amount of selling pressure over the last several years. The stock has formed a value base in recent times and is now trying to continue higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sprint Nextel is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Sprint Nextel options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Sprint Nextel Options | 32.79% | 6% | 9% |
What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| May Options | Flat | Average |
| June Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Mixed Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sprint Nextel’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sprint Nextel look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | -27.59% | -1.22% | -160% | -64.29% |
| Revenue Growth (Y-O-Y) | 0.68% | 3.24% | 5.16% | 6.40% |
| Earnings Reaction | -0.14% | -0.51% | -1.77% | 20.17% |
Sprint Nextel has seen decreasing earnings and increasing revenue over the last four quarters. From these figures, the markets have not been too happy with Sprint Nextel’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has Sprint Nextel stock done relative to its peers, AT&T (NYSE:T), Verizon (NYSE:VZ), MetroPCS (NYSE:PCS), and sector?
| Sprint Nextel | AT&T | Verizon | MetroPCS | Sector | |
| Year-to-Date Return | 25.93% | 10.59% | 23.57% | 20.37% | 14.01% |
Sprint Nextel has been a relative performance leader, year-to-date.
Conclusion
Sprint Nextel provides mobile communications solutions to a growing audience in the United States and its territories. The stock is in a long-term downtrend but seems to be setting up for higher prices in the near-term, a possible indication of a long-term trend shift. Earnings are still shrinking, for the company, while revenues have been steadily increasing which has not impressed investors. Relative to its peers and sector, Sprint Nextel has been a year-to-date performance leader. Look for Sprint Nextel stock to continue to OUTPERFORM.
No comments:
Post a Comment