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We believe Sprint (NYSE:S) may be an attractive value play at current levels, as we believe negatives (higher than average churn, universally unloved, lower profit margins than peers) are already priced into the stock. Specifically, we believe there are 4 key catalysts that will propel the stock forward over the next 6-9 months:

1. We believe Sprint’s unlimited mobile-to-mobile plan will help stabilize subscriber attrition. In a recent sell-side upgrade, Wells Fargo noted that the company is holding its own in market share gains. Better than expected churn figures and/or subscriber additions would positively impact results.

2. In the summer, Sprint and HTC are launching the first 3G/4G smart phone. A successful launch would be a huge plus in restoring the company’s reputation as a leader in technology.

3. In the last year, Sprint generated $2.8 billion in free cash flow. At the current level, Sprint is trading at 4.5 times free cash flow. While Sprint carries a large amount of debt, it intends to pay off maturities with cash flow.

4. There have been rumors of potential buyout by Deutsche Telecom’s (DT) T-Mobile subsidiary.

At around $4 per share, Sprint is universally unloved. We believe all of the negatives are priced into the stock. However, we believe if any or all of the above mentioned catalysts come to fruition, Sprint’s shares could see significant price appreciation over the next 6-9 months. Target price - $6.00.

Disclosure: The author is long S at the time of publication

Source: Sprint: Value Trap or Value Trade?