Sprint Corporation [NYSE: S] was one of the biggest gainers in Monday’s trading. The stock was up by 18% at the close of trading. This followed an official nod by the FCC chairman, supporting a merger between Sprint and T-Mobile. It was said that the two companies will be allowed to merge, provided they follow through with a plan to roll out 5G across America in the next 6-years. This merger has excited the market. That’s because, the company is now facing fewer competitors, and hence a higher level of control over prices by the newly merged corporation. It may not be the best deal for consumers, but it could significantly shore up the bottom-line of this company.
Besides the higher control over pricing, the two corporations are merging to roll out 5G, which is the next big thing in internet connectivity. By rolling out this tech to the American market, these two corporations could open new avenues for growth in the long run.
On top of that, this merger gives the two companies the muscle to compete better with their bigger rivals, AT&T and Verizon. While the merged company still trails these two in size, it is now in a much better position, and that means a possibly better reflection on the bottom-line in the future.
From the charts, bullish momentum is picking up on Sprint as it has trading very heavy volume on Monday (yesterday), May 20, 2019. In the day chart, Sprint’s bullish rally has seen the 50-day MA cut the 100-day MA from below, a signal of strong bullish segment. In technical analysis, this could be a signal to a possibility for more gains. If this bullish sentiment continues when markets open, then Sprint could possibly test $7.42 on the 200-day MA. On the monthly charts, which offer longer-term perspective, Sprint is on a sustained bullish trend, and volumes are high. This is likely to be sustained by the merger news going into the future.
Besides the merger news, Sprint’s books look pretty good too. In the last 52-weeks, Sprint has outperformed the S&P 500 by a huge margin. The S&P has returned about 4.96%, while Sprint has returned roughly 19.31% in the same period. That’s an indicator of higher demand, relative to the rest of the market.
The company’s revenues are growing too, in spite a negative net income of around -1.94 billion. For instance, quarterly revenue growth (yoy) stands at 4.40% as of the last report. The company is also well positioned to handle its operational requirements with its operating cash flow of about $10.43 billion. Though the company has a negative levered free flow, it is likely to get better, now that it is merging with T-Mobile. Over, Sprint’s bullish rally has a strong fundamentals basis to it.
With all these factors at play, it is not hard to see why Sprint has a high rating amongst analysts. Several analysts overall consensus for this stock rate it at a 3.1 which is considered a hold. However, a few analysts have upgraded their outlook for this stock in the past year. For instance, Raymond James upgraded it from market perform to outperform. It’s an interesting stock to keep an eye on in the near term.