Stifel Starts T-Mobile, Sprint At Hold: Here's Why

In two separate reports issued Thursday, Stifel analyst John Karidis initiated coverage of T-Mobile US Inc TMUS andSprint Corp S with Hold ratings.

T-Mobile

According to the research note, T-Mobile’s Hold rating is based on:

1) The uncertainty surrounding the company’s procurement of more low-band spectrum soon (and the possibility of doing this “at a palatable cost, to protect future FCF growth”)

2) The threat to T-Mobile’s Un-carrier proposition posed by bigger carriers, which will be "ramping up marketing of mobile video services” later this year.

Related Link: Sprint CEO To T-Mobile CEO: I'm Tired Of Your 'Bullsh!t'

So, whilst the near-term EBITDA outlook looks good for the company, investors may soon begin to question the sustainability of these prospects.

Sprint

Sprint’s case is different, as the company is 79 percent owned by SoftBank. The analysts at Stifel think minority shareholders “are too battle hardened to give up on the stock at this price.” However, the experts are not confident Sprint will increase its value by “trading better, consistently, and/or by selling some of its spectrum.”

Furthermore, forecasting future free cash flow to use for Sprint’s valuation is now “markedly tougher also because accounting for financing devices causes a major timing mismatch between profit and cash.”

In spite of all the aforementioned, Stifel believes investors should keep a close eye on the stock as the company “could still impact materially the investment propositions of its rivals.”