Sprint's 5-Year Plan; 2 Years Down, 3 To Go

Macquarie noted signs of operational momentum in Sprint Corp S just two years into its five-year plan. The firm is of the view that the first two years were largely successful, as liquidity improved, a new regional sales structure was put in place and customer base stabilized. However, the firm believes the company has to grind it out the next three years.

The firm's Amy Yong believes the company is en-route to a record 200+ net subscriber additions this quarter, helped by the one-two punch of "Unlimited Freedom" that began on August 26 and the Apple Inc. AAPL iPhone 7 launch. Much against fears, the firm noted that churn had not suffered due to the iPhone 7 launch due to the iPhone Forever initiative.

Related Link: Sprint's 5-Year Turnaround Plan Gets A Boost From iPhone 7

Macquarie noted that the company is planning to take the New York City by storm with an improved network. The company is also deploying the three-channel carrier aggregation in Chicago, LA, Detroit and Atlanta as well, according to Macquarie. However, the firm believes the company will be challenged by the task of changing customer perception.

The firm also suggested that squeezing costs and boosting liquidity will help improve free cash flow. Macquarie commended the motivation seen among employees, given the incentive schemes.

As such, Macquarie raised its second-quarter net subscriber additions estimate to 204,000 and reduced its churn estimate to 1.4 percent.

Citing the operational momentum seen in Sprint, Macquarie said its 5.75 times multiple and $7 price target is justified. The firm has an Outperform rating on the shares of the company.

At time of writing, Sprint shares were up 4.25 percent at $6.63.

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Posted In: Analyst ColorLong IdeasNewsAnalyst RatingsMoversTechTrading IdeasAmy YongiPhone 7iPhone ForeverMacquarieUnlimited Freedom
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