An analyst at Goldman Sachs Group Inc. (NYSE: GS) has raised his rating on shares of Sprint Nextel Corp. (NYSE: S) to ‘Buy’ and raised his price target from $3.50 to $6/share. Sprint shares are up about 10% so far today on higher than average volume. Sprint also got some pixels in Barron’s, which is looking at the company’s coming rollout of its 4G network next month as a move that will attract new customers and convince current customers to stick around. The 4G network is being built-out with help from Clearwire Corp. (NASDAQ: CLWR), and will beat competitors Verizon Communications (NYSE: VZ) and AT&T (NYSE: T) to the 4G finish line by at least a year. AT&T in fact has no plans
Sprint is also launching a new 4G smartphone, the EVO 4G, on June 4th. The EVO is built by Taiwan’s HTC Corp and uses the Google Inc. (NASDAQ: GOOG) Android operating system. The 4G network and the EVO will be available to more than 100 million people by the end of 2010, according to Sprint. Right now, the network covers about 40 million people in 32 cities.
The upgrade from Goldman Sachs doesn’t mention the 4G network, focusing instead on the fact that Sprint signed up so few new and upgraded customers in 2008. That means there are fewer post-paid customers reaching the end of their contracts, so, the thinking goes, Sprint can’t lose as many.
To be fair, the analyst did note that Sprint is doing a better job of keeping customers and attracting new ones. That is particularly true for pre-paid customers who load their phones with minutes as they are needed. Some 22% of wireless subscribers use pre-paid plans, and new and switching subscribers use pre-paid plans 55% of the time.
Sprint has made a huge bet on being first out of the chute with a 4G network. They’ll have a phone ready to go soon and access to a lot of customers who are either dissatisfied with AT&T or Verizon service, or who simply want more bandwidth.
The company has found at least one believer at Goldman Sachs. But he’s not betting on the 4G network and phone. That should be a cautionary note in today’s euphoria.
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