Sprint Follow Up (Let's Talk iPhone)
In my previous post “Why I Believe Sprint Trades 10-20% Higher in The Near Future,” I explained my beliefs on Sprint trading higher. At the time, it was only a few days until Apple was to release the new iPhone 5. I speculated that the stock was due to trade higher because Sprint was going to officially announce that it will carry the great iPhone. Well, it turns out it did trade higher but first it would trade lower, much lower.
Sprint did release it was going to carry the iPhone. However, it was the iPhone 4s not the highly anticipated iPhone 5. It was (at first) underwhelming and forgettable when the iPhone 4s was released. Just yesterday news hit that the iPhone 4s broke records with pre orders hitting a million in 24 hours. Yes, this was one of the most successful pre-orders for an Apple product.
With all that in mind, Sprint should be trading much higher. Well, Sprint didn't execute well. On the day of the announcement (Oct 4) sprint shares fell more than 10% after a report that they committed to buying 30.5 million iPhones that will cost about 20 billion (yes billion) in the next four years. The company took a huge gamble- a “bet the company” deal from a company that is already in massive debt. Sprint's stock plugged down to a 52 week low of $2.25 after the report. However, investors knew the stock was hiding higher. Calls where up and the stock started to trend higher.
Apple then released the death of the company's iconic leader Steve Jobs. It was a very sad moment even for myself. With Jobs death this phone will be one of the last phones (iPhone 5 being the possible last) that he developed. With that in mind, we know that this represents history in the sales of the new and improved 4s. Jeffrey Fidancar an analyst at Susquehanna International Group Added Sprint has helped “boost” pre-orders, in a telephone interview yesterday. He also said that “people are buying the phone to honor Steve Jobs and support the company.” Sprint has an opportunity to add at least 6 million users a year, Fidancar said. Even CEO Dan Hesse said they can't compete without Apples phones. He has previously said that the iPhone is the “number 1 reason customers leave or switch.”
So why did Sprint gap lower? In addition to butchering Friday's meeting with analysts, Sprint had a large amount of downgrades yesterday including Deutsche Bank, Collins Stewart and JP morgan to name a few. Reason being because Sprint in being completely ignorant decided to abandon the 4g platform and decided to yell help with cash woes. First of all, we all knew Sprint was cash poor and owed a lot in debt. So there's no surprise considering they just spent 20 billion dollars (yes billion) in the next few years for the iPhone.
Here is my theory:
- They are intentionally causing uproar of cash woes to be bought out. Dish is still rumored to be looking to buy out Sprint.
- Sprint is also showing investors how attractive their stock price compared to possible growth.
- They knew this was going to happen and planned it ahead of time to acquire cheaper shares.
- Sprint will keep the unlimited data plan with the iPhone. They are the only carrier that offers that plan. So I do believe in the near future the stock will trade higher. How much higher no one really knows.
Do I still think Sprint is still a company that can trade 10-40% higher? Yes and no. The stock did trade higher as predicted when it traded as high as 3.39. Still 10%+ target but it wasn't “exactly” as predicted. The stock's current chart looks to be in a bottoming formation with a possible hammer. (sprint is currently trading 8% higher today). Technically it is also oversold but in this market who knows. Sprint's stock has discounted all news as of late as well. So we are due for a bounce soon in my opinion.
Lastly, I did forewarn that Sprint could trade much lower and that my stop was placed at 2.90. That stop turned out to be the holy grail of stops. I am still holding a few shares. I am not advising anyone to buy or hold Sprint.
These posts are simply my thoughts on the market and possible scenarios. Please don't take everything I say seriously. This is solely for entertainment and education. That's it.
