Sprint Provides Reasons To Question Rebound, Moffett Says
Sprint’s stock price is on the rebound, but there are plenty of reasons for investors to have doubts, said Craig Moffett, analyst at MoffettNathanson, Wednesday in a blog post. “Obviously, no company can borrow its way out of debt. But…
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Sprint has successfully pulled off a series of clever financial engineering maneuvers that have provided additional liquidity, and at a generally lower cost of borrowing than that of Sprint’s existing debt,” Moffett wrote. But Moffett questioned some of the numbers, particularly recent write-downs based on property, plant and equipment (PP&E). In a recent 10-K filing, Sprint revealed an “astonishing” $256 million write-down on leased devices, “part of a huge $487 [million] loss on disposals of PP&E in Fiscal 2015, which accelerated throughout the fiscal year,” he said. The leasing loss number “gives one pause,” he said. At a $650 average value per leased handset, that translates to 393,000 customers “simply walking off with a Sprint handset at lease inception, without ever making a single payment.” Sprint closed at $3.82 Wednesday, down 9 cents for the day.