Pat McKeough responds to many personal questions on investing in stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for the Inner Circle. This week, a question from an Inner Circle member asked about one of the technology stocks that has been on an upward trend. Pat looks at whether this wireless company can keep growing in a competitive market with new smartphone initiatives. Q: Hi: I have been buying some Sprint following the upward trend. There is talk of good things to come. What is your take on Sprint? I am really enjoying being in the Inner Circle and hold many of your recommendations. Thanks. A: Sprint Nextel, (symbol S on New York; www.sprint.com), offers a wide range of wireless and wireline communications products and services. The company’s clients include individuals, businesses, governments and resellers. It has subscribers in all 50 states, Puerto Rico and the U.S. Virgin Islands. Sprint continues to benefit from the Apple iPhone, which the company launched on its network earlier this year. In the first quarter of 2012, it sold over 1.5 million iPhones. Of that total, 44% were new customers for Sprint. The company now has over 56 million subscribers, and almost 70% have smartphones. That’s a big plus for Sprint, because smartphones generate significantly higher revenue per customer than regular cellphones. The company’s earnings are being held back in the short term because of its heavy spending on a new high-speed 4G LTE network that should be around 25 times faster than its current 3G network. Sprint aims to catch up with competitors Verizon and AT&T, both of which have already rolled out their 4G networks. [ofie_ad]
New smartphone and promised 4G network push stock price up
The company has also launched Sprint Buyback, a new program that lets its customers sell their old phones back to Sprint for a credit up to $300 towards a new device. This should boost sales of smartphones that can take full advantage of Sprint’s new network. In June 2012, Sprint began selling the new Samsung Galaxy S III smartphone and promised that its 4G network would soon be in place. That has helped push up its stock price by over 128% from $2.50 at the start of June. In the most recent Inner Circle Q&A, Pat looks at whether Sprint can continue to add customers in an intensely competitive market. He also looks at whether the company’s cash flow, which is projected to be $0.56 per share this year and $0.90 next year, will be sufficient to service the company’s high debt which is 123% of its $17.1 billion market cap. He concludes with his clear buy-hold-sell advice on this stock. (Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.) COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members The stiff competition in the high-tech business often means that great success can be followed by a quick drop-off if a company fails to meet expectations. Do you believe that tech stocks (like Apple, for instance) are best treated as momentum stocks good for short-term profits or can investors be successful holding some tech stocks over the long term? Let us know what you think.
