The 117-year-old carrier said revenue for its fourth quarter ending March 31, fell to $8.07 billion from $8.28 billion the year before and that its net loss widened to $554 million, or 14 cents a share, from $224 million, or 6 cents per share since 2015. Sprint did beat analyst expectations on total revenues including wireless revs, EBITDA (both total and wireless), and EBITDA margins (both total and wireless), noted Evercore ISI telecom analysts Jonathan Schildkraut and Justin Ages. “However, the company missed estimates on postpaid net adds, postpaid phone net adds, and postpaid churn. Total EBITDA of $2.16 billion (+13.7 percent quarter-to-quarter, +23.8 percent year-to-year)” beating the analysts’ forecast.
Sprint (NYSE: S) was in a tough spot – offering a huge discount on handsets with the hope of luring in new and returning subscribers. The ploy was met with mixed emotion on Wall Street. Craig Moffett of MoffettNathanson felt “the strategy worked to reinvigorate growth. After all, in a commodity industry, if you offer a 50 percent discount to the competition, there’s something wrong if you DON’T add subscribers.”
“Now, after six months of the half-off therapy, the efficacy of Sprint’s medicine is once again waning; yes, they reported positive phone and total post-paid net adds… but just barely. And pre-paid results were poor.” The analyst added, “In short, the goal is no longer growth. It is sustainability.” Moffett also took out the ugly stick and gave the carrier a strong whack: “As ever, Sprint’s profitability results are hideously distorted by their policy of leasing phones to consumers – EBITDA is overstated, capex is overstated (that is, they are spending far less on network than their capex would suggest;) their valuation (as measured by EV/EBITDA) is absurdly flattered, and their leverage ratio is, in reality, much higher than it appears.”
He’s rated Sprint as a “sell” and has a $2 price target on the issue. But despite the black eye Moffitt tried to level on the carrier, investors ran up shares by 18 cents or 5.30 percent to close Tuesday at $3.68.
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