Look Beyond The Speculation: Sprint's Solid Performance Overshadowed By M&A Chatter

Investors who bought a position in Sprint Corp (NYSE: S) under the assumption of an imminent M&A deal that would pay a hefty premium may have made a logical decision. But at the same time, the company's performance as a stand-alone entity should support the stock, Barclays' Amir Rozwadowski commented in a research report.

Sprint's exploratory phase of M&A opportunities appears to be complete and there are two near-term options on the table, Rozwadowski explained. The first is an integrated service provider with Charter Communications, Inc. (NASDAQ: CHTR) under the umbrella of SoftBank, the Japan-based Sprint parent company. The second option is a merger with T-Mobile US Inc (NASDAQ: TMUS) since this deal "does not seem to be off the table."

It is, however, unclear which path Sprint would pursue and will depend on its ability to "inspire" Charter and explain the strategic rationale behind a deal, the analyst continued. Or, Sprint would need to "bridge the supposed bid/ask spread" with T-Mobile's parent company Germany's Deutsche Telekom.

Yet at the same time, Sprint managed to report "solid" earnings in its recent report that were sufficient enough to alleviate any competitive concerns. But perhaps more important the earnings report highlights Sprint's "improved bargaining position" in any future M&A discussions.

"We continue to believe the best probability for value creation is via a T-Mobile deal, though either avenue seems to provide downside protection for Sprint shareholders based on reported deal structures," the analyst stated.

Shares remain Neutral rated with an unchanged $8 price target.

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