The long decline in Sprint (NYSE:S) stock continued on Thursday morning. Sprint stock was halted, and now is off 5% as of this writing, after replacing its chief financial officer, effective Saturday.
Whether the decline is directly linked to the move isn’t clear. S stock has sold off relentlessly since November, when its long-speculated merger with T-Mobile (NASDAQ:TMUS) finally fell through. And there has been other potentially negative news this week pushing Sprint stock to once again threaten an 18-month low.
Still, the executive change at the least isn’t inspiring confidence. At the moment, that’s what Sprint stock desperately needs.
A CFO Change
Michel Combes will be Sprint’s new chief financial officer, replacing Tarek Robbiati. Per Sprint’s press release, Combes is “globally respected as a turnaround strategist.”
Sprint cited his work at what was then France Telecom, now known as Orange SA (ADR) (NYSE:ORAN) last decade, when he led a turnaround as CFO. More recently, Combes managed to rescue Alcatel-Lucent from the brink of bankruptcy; the company eventually was sold to Nokia (NYSE:NOK) for nearly $18 billion.
But Combes’ most recent efforts, at Dutch telecom Altice (OTCMKTS:ALLVF), weren’t nearly as successful. Combes stepped down after barely a year as CEO, amid rising debt and a plunging share price. That’s exactly the situation in which Sprint finds itself at the moment.
Meanwhile, a CFO change often is a sign that internal targets are being missed. As such, the immediacy and relative surprise of the move certainly raises questions about Sprint’s fourth-quarter report later this month.
Robbiati himself was hired in 2015; within a matter of months, after an initial bounce, Sprint stock hit a three-year low. The market obviously is concerned that history may repeat – without the initial bounce.
Other Concerns for Sprint Stock
It’s also possible, if not likely, that other factors are pressuring S stock. Majority owner Softbank (OTCMKTS:SFTBY) is nearing the 85% ceiling on its ownership of Sprint stock. That ends a key source of demand. The entire wireless sector has been weak over the past few sessions, with AT&T (NYSE:T) and Verizon (NYSE:VZ) pulling back after year-end rallies.
And with a T-Mobile merger over, there simply isn’t a catalyst on the horizon for Sprint stock. 2018 is setting up to be a more difficult year, with price increases potentially hurting market share and network spend hitting margins. The sector as a whole still looks like a “circular firing squad“, with the four majors in the U.S. fighting over a largely saturated market.
There’s still a bull case for Sprint stock, as I’ve written in the past. Notably, its spectrum may be worth more than the value of its debt. But what seems to worry investors at the moment is that even if that’s true in theory, it does little for Sprint shareholders right now. Cash flow is likely to be minimal at best this year and beyond.
Meanwhile, the CFO change raises questions about performance in Q4 — and into 2018 — and whether Sprint’s turnaround might be longer, and more difficult than realized. There simply isn’t much confidence toward S stock at the moment. Today’s news certainly didn’t help.
As of this writing, Vince Martin has no positions in any securities mentioned.
