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Sprint’s Value Proposition in the US Telecom Industry

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Sprint’s valuation multiples

In the previous parts of this series, we looked at the expectations of Wall Street analysts for Sprint’s (S) fiscal 3Q15 results. In this part of the series, we’ll look at the carrier’s value proposition in the US telecom industry as of January 21, 2016.

The top four US wireless players are Verizon (VZ), AT&T (T), T-Mobile (TMUS), and Sprint (S). Sprint’s wireline operations are relatively small compared to its wireless counterparts.

In terms of market capitalization, Sprint is smaller than T-Mobile as of January 21, 2016. Following are the market capitalizations for the top four wireless carriers on that day:

  • Sprint: $9.9 billion
  • T-Mobile: $30.3 billion
  • Verizon: $186.6 billion
  • AT&T: $212.5 billion

As of January 21, the carriers had current year EV-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) as follows:

  • Sprint: 5.6x
  • AT&T: 7x
  • Verizon: 6.3x
  • T-Mobile: 7.3x
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Wall Street’s view of Sprint

Now let’s look at how Wall Street analysts see Sprint. As of January 21, 2016, there were three “buy” recommendations, seven “sell” recommendations, and 18 “hold” recommendations for Sprint stock. The median analyst target price for the stock was $4. Sprint stock closed at $2.50 on the same date.

Instead of taking direct exposure to the stocks of players in the US telecom industry, you can consider taking a diversified exposure to the space by investing in the iShares Russell 1000 Value ETF (IWD). IWD held a total of ~2.5% in some of the US telecom companies at the end of December 2015.

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