Tuesday, May 15, 2012
Thelma Got Her Groove Back, Can Sprint with the iPhone5?
One would think that locking one's fate with Apple (NASDAQ: AAPL) would have been very rewarding for a company and its shareholders. That has not been the case with Sprint-Nextel (NYSE: S). Sprint-Nextel signed an agreement with Apple for iPhones that was very costly. The investment community was expecting the iPhone5 last fall. Instead the iPhone4S was released. While that was beneficial for Apple and devastating to competitors such as Nokia (NYSE: NOK) and Research-in-Motion (NASDAQ: RIMM), Sprint-Nextel suffered tremendously, too. As a result, Sprint-Nextel was downgraded three times last October. This fall could bring Sprint-Nextel back. According to a report from Piper Jaffray (NYSE: PJC), Apple will be introducing the iPhone5 in the fall. Obviously, Sprint-Nextel shareholders are hoping that will reverse the iPhone4S debacle. There is some hope. Earnings-per-share growth this year for Sprint-Nextel is 16.79%. For the next year, earnings-per-share growth for Sprint-Nextel is projected to be 29.90%. For value investors, Sprint-Nextel is very compelling. The price-to-book ratio is 0.71. The price-to-sales ratio is 0.22. The price-to-cash-per share ratio is 0.99. However, there is a great deal of debt. The debt-to-equity ratio for Sprint-Nextel is well over 2-1. That means that it required more than $2 in debt to create every $1 in equity for Sprint-Nextel. By contrast, Apple has no debt. The situation with Sprint-Nextel is aptly summed up in one paragraph by The Dividend Kings with, "The main issues that keep Sprint from being a confident long-term investment are questionable management tactics which have led to an increasing amount of debt and litigation. The prominence of its chief competitors also brings doubt into play as to whether Sprint can overcome its problems or sustain itself in this industry. There is potential upside when I look at the different things Sprint is doing to increase its value in the industry. Despite this extremely low stock price for a major brand in the United States, the stock price can certainly increase by multiples of five or ten within the next few years. Still, some analysts feel Sprint could eventually go bankrupt, so investors need to keep a keen eye for the best time to sell and hedge shares of this stock.' Sprint-Nextel is adding customers. That is a good thing. But what must be asked is, "At what price glory?" The company is losing money with a negative profit margin of 9.72%. Having such a burdensome debt load makes the negative profit margin even more troubling As detailed in a previous article on www.smallcapnetwork.com, "Are Sprint-Nextel, Nokia and Alcatel-Lucent now Just Trading Vehicles (S, ALU, NOK)? these stocks are suitable only for trading now. If the iPhone5 from Apple does come out in the fall, as predicted by Piper Jaffray, there could be gains ahead for Sprint-Nextel that will result in trading profits. wholesale accessories,iphone accessories,ipad accessories,ipod accessories