Sprint PCS sharply higher as Bernstein urges investors to buy
AFX News Asia, 11/26/2001 3:08:00 PM
NEW YORK, Nov 26, 2001 (AFX-Asia via COMTEX) -- Sprint PCS shares were sharply higher in afternoon trade after Bernstein analysts recommended investors buy the stock ahead of its annual analyst meeting on Dec 4 at which they expect to hear positive news, dealers said.
At 1.26 pm, Sprint PCS shares were trading up 1.48 usd at 26.88, a gain of 5.8 pct.
Sprint FON shares were up 30 cents at 21.90 and AT&T Wireless was up 34 cents at 14.84.
The DJIA was down 1.04 points at 9,958.67. The S&P 500 was up 2.77 points at 1,153.11 and the Nasdaq composite was up 20.89 points at 1,923.79.
Earlier, Bernstein analyst Alex Trofimoff, who rates the stock 'outperform', urged investors to buy it ahead of its annual analyst meeting.
"PCS investment results before and after its annual analyst meetings are supercharged -- in 1999 PCS returned 19 pct for investors who purchased the stock five days before the meeting and held it for five days after," Trofimoff said in a note.
Conversely in 2000, investors with the same investment horizon lost 32 pct of their investment after the company provided negative guidance at the meeting.
Bernstein is expecting this year's meeting to hear positive guidance driven by three factors.
Demand for wireless services is expected to be robust, if not explosive; the company will likely have a lower-than-expected churn rate as customers are less willing to switch providers in tough economic times at the cost of buying a new handset; and fourth-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) guidance is too low at 450-500 mln usd. Bernstein is expecting the company to raise fourth-quarter and 2002 EBITDA estimates.
For the company to meet its EBITDA guidance in the fourth quarter, cost per subscriber would need to be 42 usd, up from the 40 usd recorded in the third quarter.
But trends indicate that cost per subscriber should fall to 38-40 usd, he said.
"Since we expect subscriber addtions only modestly above the third quarter, and also believe PCS is still significantly scaling the business along its trendline, we believe PCS will likely raise EBITDA guidance," he said.
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