Sprint's Marketing Message Is Running Well

Citi’s Michael Rollins believes Sprint Corp S's advertising campaign is helping to drive higher store traffic.

Rollins maintains a Neutral rating on the company, while raising the price target from $6 to $7.

Effective Marketing

The analyst also expects better gross additions, partly driven by improvements in store productivity as well as the advertising campaign, which is likely to lead to higher net additions in the near term.

Related Link: Preorders Suggest Apple's iPhone 7 May Exceed The Street's Low Expectations

“Sprint’s ability to cut expenses has been evident in recent reported results, but we believe postpaid phone customer growth is crucial to driving sustainable free cash flow. Sprint was the only national carrier to grow postpaid phone gross adds in C2Q/16, suggesting a more effective marketing campaign,” Rollins mentioned.

Estimates Raised

Sprint reported that iPhone pre-sale activity had risen 375 percent in the first three days as compared to the same period in 2015. The analyst believes that since replacement usually drives pre-orders, churn and gross additions could also see improvement.

The post-paid phone net adds estimates for CQ3:16 and CQ4:16 have been raised from 50,000 to 225,000 and from 250,000 to 300,000, respectively.

“With improving execution and results, we expect the market will continue to support a better valuation to Sprint’s equity,” the analyst stated, while expecting Sprint shares to remain volatile due to: “1) despite a $26 billion market cap, the free float is just about $5 billion as Softbank owns 80+ percent of the shares; and 2) short interest represents ~25 percent of the free float.”

At time of writing, Sprint was up 1.54 percent on the day at $6.61.

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