JPM now believes the wireless industry's cumulative performance since 2003 makes the group's valuation less compelling and their focus in 2007 will be on relative values rather than a call on the group to rise. They expect upside to the stocks will be driven by turnarounds, upside to estimates, or asset plays.
In their view investors have become overly pessimistic on the outlook for Sprint Nextel. Though the merger has been extremely disappointing to date, the firm believes S will make substantial progress this year. Specifically: 1) return to positive net adds in 2Q07, and possibly in 1Q07; 2) the Street is no longer overly bullish on the stock, suggesting there could be upside on incrementally positive data; and 3) consensus estimates are calibrated down to a point where S is now likely to beat them - supported by the fact that there are only few Buy ratings now.
Maintains Overweight rating.
Notablecalls: JPM is probably on right tracks with their call. I have no feel for what the stock will do in the s-t, though.