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Walter Piecyk, an analyst with Pali Research, today cut his rating on Sprint Nextel (NYSE:S) to Sell from Neutral, asserting that “the business is eroding further” and that “investors are too optimistic about both the possibility of an operational turn around in [the fourth quarter of this year or first quarter of next year] and the potential sale of the company.”

Piecyk has a price target on the stock of $14, far below the current stock price. He notes that Pali’s EBITDA estimates are $1 billion below the consensus for this year and $2 billion below consensus for 2008. “We believe that if the company reports quarterly results below the consensus estimates or if the consensus estimates are revised closer to our estimates the stock could begin to drop in search of a trough valuation. Currently we believe investors are valuing the company with some optimism that the turnaround has begun.”

Piecyk expects the company’s post-paid subscriber base to drop by more than 1.3 million in 2007, “primarily because of the inability of the company to improve its churn rate.”

Piecyk also thinks rumors that Sprint could get a buyout bid from Comcast (NASDAQ:CMCSA) or a group lead by retiring executive chairman Tim Donahue are likely false. “We have found little to no merit in these theories and our opinion is that there is no intention by either of the parties to execute such a plan…we believe this is a highly unlikely possibility for the foreseeable future.”

Sprint shares today have gained two cents to $19.17.

Source: Pali: Sprint Buyout Rumors Are False, Stock's Overpriced