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Sprint: FCC Discovered Fraud, Stock Fell

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Sprint (S) stock fell about 3.3% on Tuesday and closed the trading day at $6.37. The stock has fallen about 0.24% in today’s trading session as of 9:56 AM ET.

Why did Sprint stock fall?

Sprint stock fell after the FCC learned that the company claimed government subsidies for approximately 885,000 Lifeline customers “even though those subscribers were not using the service.” The 885,000 customers account for around 30% of Sprint’s Lifeline customer base and around 10% of the total Lifeline customer base.

Ajit Pai, the FCC’s chairman, said, “Lifeline is an important component of our efforts to bring digital opportunity to low-income Americans, and stopping waste, fraud, and abuse in the program has been a top priority of mine since I’ve been at the Commission.” He also said, “It’s outrageous that a company would claim millions of taxpayer dollars for doing nothing. This shows a careless disregard for program rules and American taxpayers. I have asked our Enforcement Bureau to investigate this matter to determine the full extent of the problem and to propose an appropriate remedy.”

Merger with T-Mobile

Geoffrey Starks, the FCC’s commissioner, tweeted that the proposed merger agreement between T-Mobile (TMUS) and Sprint “should be paused until we figure this out.” In July, the Department of Justice approved the merger. However, the merger deal faces a lawsuit from about 18 state attorneys general. The court challenge alleges that the merger between the third and fourth-largest mobile operators could reduce competition and increase prices for consumers. The antitrust trial is scheduled to start in December.

Sprint’s stock returns

Sprint stock has returned -5.5% in the trailing one-month period and -0.2% in the trailing 12-month period. The stock was trading 20.97% below its 52-week high of $8.06. Meanwhile, the stock was trading 17.10% above its 52-week low of $5.44.

Sprint has gained 9.5% YTD (year-to-date). T-Mobile and AT&T (T) have also risen this year. They have risen around 24.8% and 31.0%, respectively, YTD. On Tuesday, AT&T stock fell 0.59% and closed at $37.38, while T-Mobile stock fell 0.75% to $79.36.

Sprint’s market cap is $26.07 billion, while T-Mobile and AT&T have market caps of $67.81 billion and $273.14 billion, respectively.

Analysts’ ratings

Currently, 18 analysts cover Sprint stock. Among the analysts, 14 recommend a “hold,” three recommend a “sell,” and one recommends a “buy.” Analysts have a 12-month average target price of $6.81 for Sprint stock. The target price indicates an upside potential of 6.9% from the last closing price.

Technical levels

Based on Sprint’s closing price on Tuesday, the stock was trading 5.5% below its 20-day moving average of $6.74 and 7.7% below its 50-day moving average of $6.90. The stock was also trading 6.7% below its 100-day moving average of $6.83. With a 14-day relative strength index score of 31, the stock is approaching the “oversold” zone.

On Tuesday, Sprint stock closed near its lower Bollinger Band range level of $6.51. The value suggests that the stock is in the “oversold” zone.

Read How Will the T-Mobile-Sprint Merger Impact Consumers?, T-Mobile and Sprint Merger Could Lead to Job Losses, and Why Are Analysts Losing Confidence in Sprint Stock? to learn more about the merger deal.

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