Sprint Nextel (S) reported this morning that it paid off an outstanding loan worth $1 billion on its $4.5 billion revolving credit facility. As a result, the wireless company no longer has an outstanding balance on its revolving credit facility. At the end of the third quarter, Sprint had $5.9 billion on hand in cash, cash equivalents, and short-term investments, plus $1.6 billion in borrowing capacity under its revolving bank credit facility.
In other Sprint news this morning, Sprint shares were upped from "neutral" to "outperform" at Credit Suisse. Analyst Jonathan Chaplin set his price target at $6, asserting that the company will benefit from cost cutting, stronger sales of prepaid service, and improved customer retention trends. Sprint's stock settled Friday at $3.10, so Chaplin's price target implies expected upside of nearly 94%.
S is up nearly 11% at last check after tagging an intraday peak of $3.48. The site of the stock's session high coincides with resistance from its 10-week moving average. Along with its 20-week counterpart, this trendline has acted as a steadily descending ceiling for Sprint since late June.
Nevertheless, option players are snapping up new bullish bets today. Most active is Sprint's January 2010 5 call, where 11,964 contracts have crossed the tape on open interest of 78,079 contracts. Nearly all of these calls have traded near the ask price, suggesting they were purchased, and implied volatility has edged up 0.9% so far.
However, some of these out-of-the-money calls might have been picked up as hedges by short sellers. Short interest represents a respectable 3.1% of the equity's float, even following a 9.7% drop during the past month. In light of today's bullish news, some of Sprint's bears might be looking to hedge their short stock positions against a continued rally.
Elizabeth Harrow is a senior equities analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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