Morgan Stanley Sees Challenging Path to Recovery for Sprint Corporation

In a report published Wednesday, Morgan Stanley analyst Simon Flannery reiterated an Underweight rating and $5.00 price target on

. In the report, Morgan Stanley noted, “Wireless industry growth is slowing, with penetration at +100%. New subscribers to the industry are generally of lower value. Sprint's competitive position is challenged. We expect strong competition from industry peers who have eclipsed Sprint's footprint with 4G / LTE to pressure growth. Sprint will spend billions of dollars over the next several years upgrading its network and acquiring subscribers. In our view, these projects and reinvestments carry high execution and FCF risks. We expect top line growth to slow given saturation of the (1) service plans with the $10 price increase from Feb. 2011 and (2) smartphone postpaid subscriber base. We also expect margin dilution from subsidies and near-term pressure from the Network Vision project, though Adj. EBITDA should find support from Vision cost savings.” Sprint Corporation closed on Tuesday at $7.90.