Should Sprint Nextel Be In Your Portfolio?

With shares of Sprint Nextel (NYSE:S) trading around $7, is S an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Sprint Nextel offers wireless and landline communications products and services to individuals and businesses in the United States. Through its two segments, Wireless and Wireless, it offers voice and data transmission services to subscribers in all 50 states, Puerto Rico, and the United States Virgin Islands under the Sprint corporate brand, which includes its retail brands of Sprint, Nextel, Boost Mobile, Virgin Mobile, and Assurance Wireless. An increasing share of the population is opting for these communications products and services, fueling profits for Sprint Nextel. A recent bidding war with Dish Network (NASDAQ:DISH) for Clearwire (NASDAQ:CLWR) has ended and left Sprint Nextel with the opportunity to take over the rest of the company that will lead to further expansion. As the desire to connect with others continues to rise, profits and the stock price should follow.

T = Technicals on the Stock Chart are Strong

Sprint Nextel stock has witnessed an explosive move higher over the last couple of years. The stock is now digesting gains from its recent move so it may need some time before continuing. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Sprint Nextel is trading between its rising key averages which signal neutral price action in the near-term.


(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Sprint Nextel options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Sprint Nextel Options




What does this mean? This means that investors or traders are buying a very minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options



August Options



As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Sprint Nextel’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sprint Nextel look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





Sprint Nextel has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been expecting a little more from Sprint Nextel’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Sprint Nextel stock done relative to its peers, AT&T (NYSE:T), Verizon (NYSE:VZ), T-Mobile (NYSE:TMUS), and sector?

Sprint Nextel





Year-to-Date Return






Sprint Nextel has been a relative performance leader, year-to-date.


Sprint Nextel provides communications services and technology to a multitude of consumers and companies across the nation and its territories. The stock has been on a powerful move higher but is now digesting gains from a recent run. Over the last four quarters, investors have expected a little more as earnings have been mixed and revenue figures have been rising. Relative to its peers and sector, Sprint Nextel has been a year-to-date performance leader. Look for Sprint Nextel to OUTPERFORM.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.