Sprint Nextel Corp. (NYSE: S) is the nation’s third-largest wireless provider behind rivals Verizon (NYSE: VZ) and AT&T (NYSE: T). Sprint stock has become a favorite among traders for its low share price, liquidity and volatility. Over the past three months, the trend in S shares has definitely been higher, the 52-week stock trend shows quite a few big price swings along the way.

As of March 1, Sprint shares traded right about $4.25 per share, well above the 52-week low of just $3.23 we saw last March, yet far below the 52-week high the stock reached last May. With S stock currently trading right in the middle of its 12-month trading range, many investors are wondering which tack the wireless giant will take.

Here are three pros and cons when considering the future of Sprint Nextel shares.

Sprint Stock Pros

Increasing customer base. Sprint Nextel recently reported better-than-expected subscriber additions in the fourth quarter. What’s most important about this metric is that it was the first quarter in more than three years where the company actually added customers. Sprint added 58,000 subscribers in Q4, which was more than three times the 17,000 customer additions that wireless industry pundits were anticipating.

Greater capital expenditures. Along with its recent quarterly earnings statement, Sprint announced a significant increase in capital expenditures for 2011. The increased spending will be devoted to improving the company’s wireless network. Sprint now plans to spend about $3 billion in 2011 under its Network Vision program, a much greater amount than the $1.9 billion in capital spending in 2010. If this capital spending investment in Sprint results in an improved user experience, it could translate nicely into more subscribers and bigger earnings.

Big 4G footprint. Perhaps the biggest pro on Sprint’s side is its deployment of the ultra-fast 4G WiMax network. If wireless users see Sprint as the fastest option around, the company could see a big migration away from rivals and into its wireless network services. The expanding 4G footprint is key for S shares going forward, and if the company succeeds it could mean clear sailing for the stock.

Sprint Stock Cons

Earnings miss. While the improved subscriber addition metric was good for Sprint, the company still failed to meet expectations on the earnings front. Sprint reported a loss of $929 million, or 31 cents a share, compared with a year-earlier loss of $980 million, or 34 cents a share. Revenue in the quarter did increase year-over-year by 5.5% to $8.3 billion; however, the numbers fell short of analysts’ expectations for a loss of 30 cents a share on $8.15 billion in revenue.

A high-profile downgrade. When the top investment bank in world cuts your rating from “Buy” to “Hold,” it’s usually not a harbinger of more upside to come. That’s what happened to S shares recently, as Goldman Sachs (NYSE: GS) analyst Jason Armstrong reduced his rating on the stock. Armstrong said in a note to clients that the company’s margins remain under pressure and capital spending plans appear higher than previously expected. Armstrong wrote, “We no longer find compelling risk/reward in Sprint, and hence downgrade.”

A short-lived rally. Sprint shares rallied immediately after their Feb. 10 earnings release, but since then the shares have come way down. The stock recently fell below technical support at the long-term, 200-day moving average, and just days ago it plunged below its short-term, 50-day moving average. This bearish technical development does not bode well for S shares in the near future.

Verdict

There are certainly plenty of positives Sprint Nextel going forward. The company’s 4G presence has the potential to rock the wireless industry, and much of its recent losses can be attributed to the write-off of its investment in Clearwire Corp. (NASDAQ: CLWR). That said, I think the verdict needs to be rendered in favor of the cons here. I agree with Armstrong that there really isn’t a very compelling risk/reward in S shares here, and the recent selling doesn’t give me much confidence that investors are ready to race back into the shares. As such, investors should probably think twice before dialing up this stock.

At the time of this writing, Jim Woods had no positions in any of the securities mentioned here.