Telecom Stocks Downgraded As S&P 500 Hits New 52-Week Low

The Cheat Sheet

Macquarie Securities’ telecom analyst Kevin Smithen downgraded the stocks of four telecoms companies today.  Shares of Spint-Nextel , Frontier Communications , Leap Wireless , and MetroPCS are all trading lower on the news.  Smithen argues that the interest rate on these companies’ bonds are very high compared to investment grade firms such as Verizon Communications and CenturyLink .

The higher the interest rate on the debt, the more the company pays out in cash to service that debt, and so the less cash the company has to invest in its business or pay out dividends.  This puts pressure on stock prices.

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Following is some information about these companies’ stock price performance:

  • Sprint-Nextel : The shares recently traded at $2.92, down $0.12, or 3.78%, on the day.  The shares have traded in a 52-week range of $2.87 to $6.45 and its market capitalization is $8.76 billion.  About the company: Sprint Nextel Corporation offers a range of wireless and wireline communications services to consumer, business, and government customers.  The Company develops, engineers, and deploys various technologies, including two wireless networks offering mobile data services, instant national and international push-to-talk capabilities, and a global Tier 1 Internet backbone.
  • Frontier Communications : The shares recently traded at $5.75, down $0.36, or 5.89%, on the day.  The shares have traded in a 52-week range of $5.67 to $9.84 and its market capitalization is $5.72 billion.  About the company: Frontier Communications Corporation provides communications services to rural areas and medium-sized towns and cities.  The Company offers a variety of voice, data, and Internet, and television services.
  • Leap Wireless : The shares recently traded at $61.2, down $0.79, or 11.42%, on the day.  The shares have traded in a 52-week range of $5.78 to $17.66 and its market capitalization is $481.70 million.  About the company: Leap Wireless International, Inc. provides mobile wireless services.  The Company’s services are targeted to meet the needs of customer who are under-served by traditional communications companies.  Leap’s Cricket service is available to customers in various states from New York to California.
  • MetroPCS : The shares recently traded at $8.24, down $0.47, or 5.34%, on the day.  The shares have traded in a 52-week range of $9.14 to $18.79, and its market capitalization is $2.98 billion.  About the company: MetroPCS Communications, Inc. is a wireless communications provider in the United States.  The Company offers unlimited voice and data services to the mass market.
  • Verizon Communications : The shares recently traded at $36.51, down $0.30, or 0.82%, on the day.  The shares have traded in a 52-week range of $31.60 to $38.95 and its market capitalization is $103.34 billion.  About the company: Verizon Communications, Inc. is an integrated communications company that provides wire line voice and data services, wireless services, Internet services, and published directory
  • CenturyLink : The shares recently traded at $32.51, down $0.61, or 1.84%, on the day.  The shares have traded in a 52-week range of $31.75 to $46.87 and its market capitalization is $20.02 billion.  About the company: CenturyLink, Inc. is an integrated communications company.  The Company provides a wide range of communications services, including local and long distance voice, Internet access and broadband services.  CenturyLink operates throughout the United States.

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