Sprint Gets Dropped (S)(INTC)(MOT)

AG Edwards thinks that Sprint’s stock has gone as far at it can, at least for now.Could be. The bank cut the phone company from a “buy” to a “hold” with a price target of $21. Sprint trades about $1 shy of that. The reasoning behind the change of heart is that Sprint’s stock has moved up on speculation that the company may be bought by Comcast and, since the likelihood of that is small, the stock has had its run.Compared to Verizon and Cingular, Sprint is a bit of a dog. Its subscriber churn rate is too high and its added fewer new subscribers in the last quarter. It trades below its 52-week peak of nearly $27 while most telecom stocks are at multiyear highs.The Edward’s analysis misses the point. There are only three significant cell phone players in the US, and Spint is one of them. As Morningstar points out, the Nextel component of the company is largely made up of corporate customers who are more likely to spend extra money for upgraded services like wireless data plans.The reasoning that Spint will go no higher is based on the premise that the Sprint integration with Nextel will continue to go badly and the yield that the company gets from its 50 million subscribers will not improve.Targetting Spint’s price at $21 is also a statement that Spint’s new WiMax build-out to create a broadband phone network will not be successful. The technology is already a succes in places like Korea and is being tested in a number of countries around the world. Intel, Motorola, and Samsung are making a large investment in the tech and believe that they will benefit from supplying infrastructure and handset for WiMax systems aournd the world.Sprint and its allies may not become the dominant cell phone provider in the US, but the company could make a very good living from being No. 2.Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.