Sprint Corp. (NYSE: S) may be a tracking stock and it may still be considered a merger candidate, even after the Softbank transaction. Opinions vary widely about the past and the future, but Credit Suisse maintained its Underperform rating. The firm believes that there could be 25% downside in the stock price after meeting with management.

Credit Suisse’s price target of $5.50, versus a $7.49 close, actually implies downside of almost 27%. The firm believes that Sprint’s valuation does not reflect the risk that the turnaround could take longer than expected, and it noted that the turnaround could even fail to materialize.

The firm pointed out that Sprint trades at an estimated EV/EBITDA multiple of 7.0 times for 2015, versus a range of 5.7 times to 6.5 times for the rest of the group. Another issue is Sprint’s aim of network parity with its peers in 2014, but the concern is that it is unlikely to achieve meaningfully faster speeds than peers until the company deploys a 3×20 carrier aggregation on 2.5 GHz spectrum in late 2015.

The report points out that churn has been higher than expected due to Network Vision and a drag from the Nextel network shutdown. Sprint’s average revenue per user has grown since 2011, but it is expected to be flat to down in the fourth quarter due to the introduction of equipment installment plans and purchase price accounting. A concern is that the Network Vision could put some pressure on margins in 2014.

Note that Sprint shares were actually up more than 1% at $7.58 after the call, so the initial indication is that the firm’s $5.50 target may be off base. Sprint’s consensus price target is $7.28, its highest price target is $9.00 and this $5.50 target from Credit Suisse is the lowest on the street. The stock has traded in a range of $5.61 to $7.80 over the past 52-weeks.

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