Sprint Corp.'s stock retreated Friday as analysts second-guessed investors who have been betting that the wireless phone carrier will be able to pull off a takeover of its smaller rival, T-Mobile.
Doubts about the likelihood of that deal between the third- and fourth- largest U.S. wireless carriers have surfaced in a succession of analyst reports to the start of the new year.
Stifel analyst Christopher King became the latest to join the chorus of skeptics with a Friday assessment advising Sprint shareholders to sell the stock. He previously rated Sprint as a "Hold."
King's sobering take on Sprint followed Thursday downgrades by Cowen and Co. and Macquarie Securities.
Sprint's stock shed 58 cents, or 5.6 percent, to $9.82 in early afternoon trading. It's the steepest decline since last July when Softbank Corp. paid $21.6 billion for a controlling stake in Sprint, which is based in Overland, Park. Kan.
Citing unnamed sources, various media reports have raised the possibility of Sprint leaning on Softbank's financial muscle submit a bid to buy T-Mobile during the first half of this year. If it were to happen, the deal could empower Sprint to pose a more formidable threat to market leaders AT&T Inc. and Verizon.
The speculation boosted Sprint's market value by more than 30 percent during the final three weeks of last year.
But King believes investors got carried away, pegging the value of Sprint's stock at $7.50. Even if Sprint were to try to take over T-Mobile, he doubts the deal would receive the necessary approvals from U.S. government regulators. Cowen and Co. analysts Colby Synesael and Gregory Williams have similar concerns, noting that Federal Communications Commission Chairman Tom Wheeler recently observed: "The mobile business is today with four carriers a competitive business, and it's important it stay that way."
Even though they also downgraded Sprint's shares, Synesael and Williams raised their price target on the shares to $8.25 from $7.50.
T-Mobile US Inc.'s stock also took a hit Friday, falling $1.26, or 3.8 percent, to $32.11 in afternoon trading.