RBC Capital’s Jonathan Atkin this morning cut his rating on shares of Sprint-Nextel (S) to Sector Perform from Outperform, and cut his price target to $3 from $4, writing that the company’s entering its “peak cash burn” phase for several quarters, and there’s unlikely to be a “positive catalyst” during that time.
Atkin cut his Ebitda estimate for next year to $3.4 billion from $3.8 billion and ramped up his capital expenditure forecast for Sprint to $5.4 billion from $4.7 billion.
Cash will be drained by the construction of the company’s “Network Vision” upgrade to its facilities, and by spending on subsidies for Apple’s (AAPL) iPhone.
But the biggest issue he seems to foresee is the uncertainty about just how the company will successfully balance all the computing networks and technologies it now possesses or plans to implement:
We see significant uncertainty around the pace of Network Vision 4G implementation, iDEN termination, the ability to transition the iDEN customer base to CDMA, dual-mode FDD/TDD LTE phone availability and function, and the progression of Clearwire��s LTE build. Thus, the eventual margin accretion impacts from Network Vision, iPhone, and iDEN termination are difficult to project.
Sprint shares today are down 8 cents, or 3%, at $2.53.
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