Can Sprint Climb Higher?

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With shares of Sprint (NYSE:S) trading around $7, is S an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Sprint offers wireless and landline communications products and services to individuals and businesses in the United States. Through its two segments, Wireless and Wireline, it offers voice and data transmission services to subscribers in all 50 states, Puerto Rico, and the United States Virgin Islands under the Sprint corporate brand, which includes its retail brands of Sprint, Nextel, Boost Mobile, Virgin Mobile, and Assurance Wireless. An increasing share of the population is opting for these communications products and services, fueling profits for Sprint.

Sprint is reportedly looking to team up with popular music streaming service Spotify by offering a Spotify subscription at a discount along with the purchase of a Framily Plan through the wireless carrier, according to sources who spoke to Inferse. Those sources said that Spotify would offer a free trial of its premium service to Sprint Framily Plan subscribers and then give heavy discounts on a premium subscription when the trial period expires. Spotify offers a free, ad-supported service and a premium, ad-free service for $9.99 per month. As the online music streaming market becomes increasingly competitive, Spotify is trying to convince more people to pay for its premium service. Inferse said that Sprint will likely unveil the option at a media event on April 29 in New York City.

The collaboration would be in competition with AT&T’s (NYSE:T) recent deal with Beats Music. That deal gives AT&T customers access to the streaming service for $9.99 per month or gives the option to share a subscription with up to five people for $15 per month. The rumored deal between Spotify and Sprint would be a more competitive option than the one offered by AT&T and Beats. Spotify has been reducing fees and increasing options lately in an attempt to make itself the top music streaming service. The company recently did away with a cap on free monthly music listening to offer unlimited streaming for free.

T = Technicals on the Stock Chart are Mixed

Sprint stock has been moving higher over the last couple of years. However, the stock is currently pulling back and may need time to stabilize. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sprint is trading between its rising key averages which signal neutral price action in the near-term.

S

Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Sprint options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Sprint Options

72.43%

0%

0%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Average

Average

June Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sprint’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sprint look like and more importantly, how did the markets like these numbers?

2013 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

-40.90%

-30.77%

-15.21%

27.59%

Revenue Growth (Y-O-Y)

1.52%

-11.57%

0.31%

0.68%

Earnings Reaction

2.73%

3.74%

7.31%

-0.14%

Sprint has seen decreasing earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been pleased with Sprint’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Sprint stock done relative to its peers, AT&T (NYSE:T), Verizon (NYSE:VZ), T-Mobile (NASDAQ:TMUS), and sector?

Sprint

AT&T

Verizon

T-Mobile

Sector

Year-to-Date Return

-14.50%

-0.11%

-2.38%

-10.60%

-5.89%

Sprint has been a poor relative performer, year-to-date.

Conclusion

Sprint provides communications services and technology to a wide variety of consumers and companies in the United States and its territories. The company is reportedly looking to team up with popular music streaming service Spotify. The stock has been moving higher over the last couple of years, but is currently pulling back. Over the last four quarters, earnings have been decreasing while revenue figures have been increasing which has left investors pleased about recent earnings announcements. Relative to its peers and sector, Sprint has been a poor year-to-date performer. WAIT AND SEE what Sprint does this quarter.

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