Can Sprint Nextel Extend Its Rally?

With shares of Sprint Nextel (NYSE:S) trading around $6, 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 a range of wireless and wireline communications products and services to individual consumers, businesses, government subscribers, and resellers in the United States, Puerto Rico, and the U.S. Virgin Islands. The company’s wireless segment provides local and long distance wireless voice services, internet access, asset and fleet management, dispatch services, navigation tools, and mobile entertainment applications. The wireline segment offers wireline voice and data communication. As consumers become increasingly more connected, Sprint Nextel is poised to capitalize on this powerful trend through its products and services.

Head on over to the next page to explore the technical landscape of Sprint Nextel’s stock…

T = Technicals on the Stock Chart are Strong

Sprint Nextel has seen a long-term downtrend since reaching highs during the technology bubble. Currently, the stock has gained some ground and its attempting to reverse this long-term downtrend. 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 above its risking key averages which signal bullish 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.

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

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

Sprint Nextel has seen increasing revenue growth but is still working on its earnings growth. From these figures, the markets have been mostly dissatisfied with Sprint Nextel’s last four earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

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

Sprint Nextel has trailed most of its peers in year-to-date performance.

Conclusion

Sprint Nextel is competing in a telecommunications industry that is seeing and will continue to see strong signs of growth. The stock has suffered over the years but it is currently seeing a strong bounce from lows. Earnings are still being worked on but revenue has been steadily growing over the last four quarters. Relative to its peers and sector, Sprint Nextel stock has underperformed most of its competitors. WAIT AND SEE what Sprint Nextel does in the coming quarter.

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.