Sprint Stock Can Run On Opportunities Outside Core Mobile Phone Operations

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Sprint ( S ) primarily competes with AT&T ( T ) and Verizon ( VZ ) in the mobile phone business. The company has been looking to rebuild its deteriorating image with multiple initiatives like improving customer service, network modernization, moving iDEN subscribers to a CDMA platform, investing in WiMax 4G, and expanding smartphone offerings. While these moves could lift core mobile phone operations, Sprint can also benefit from strategic efforts to tap new markets.

Our price estimate for Sprint's stock stands at $4.35 , in line with market price. Upside stemming from a push into markets like smart cars and smart grids could present a buying opportunity for investors.

Sprint's Push Beyond Mobile Phones

Sprint is investing in technology that would add wireless connectivity to cars, a market that Sprint believes could bring revenues of over $1 billion within a few years. The technology would link mobile devices and applications to cars in order to enhance communication, navigation, and entertainment features.

The move could create substantial upside for Sprint, as it positions its operations to tap a market with large growth potential. According to research from Gartner, roughly 4% of U.S. cars currently feature wireless connectivity. Comparatively, mobile phones boast roughly 90% penetration in the U.S., so the opportunity for connected automobiles to close the gap is large. Gartner anticipates that more than half of all premium vehicles in the U.S. will support apps by 2013, with half of all mass market cars supporting the technology within 3 years thereafter.

Sprint has also partnered with ECOtality, an electric car charging company, to connect its electric car chargers throughout the country. New developments will help drivers locate charging facilities through GPS, enable data tracking on charging habits, and facilitate other processes like billing and digital content delivery. The move represents a foray for Sprint into the smart-grid arena, a next-generation network concept to monitor electricity consumption of households and businesses.

Sprint's effort to expand its operations could present an interesting opportunity for investors, as the company increases its mix of revenues beyond core mobile phone segments. The trend could effectively expand the base of U.S. mobile internet subscribers, a metric to which Sprint's stock value is particularly sensitive. The chart below highlights the impact to Sprint's stock value from changes in this metric.

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You can see the complete $4.35 Trefis price estimate for Sprint's stock here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: S , T , VZ

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