Sprint, T-Mobile Stocks Spiral After Calling Off Merger

Community Health Systems stock was hit with additional price-target cuts following last week's disappointing earnings

Nov 6, 2017 at 9:59 AM
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Analysts are weighing in on telecoms Sprint Corp (NYSE:S) and T-Mobile US Inc (NASDAQ:TMUS), as well as healthcare stock Community Health Systems (NYSE:CYH). Here's a quick roundup of today's bearish brokerage notes on S, TMUS, and CYH.

Sprint Shares Plunge After Ending Merger With T-Mobile

Sprint stock hit a new annual low of $5.81 this morning, and was last seen down 12.4% to trade at $5.86, after the telecom called off its merger with T-Mobile on Saturday. Masayoshi Son, CEO of Sprint parent Softbank, is confident Sprint can grow independently, but said the company would still consider a merger if its management rights are preserved. As a result, KeyBanc downgraded the security to "underweight" from "sector weight," and Citigroup and Evercore ISI cut their price targets to $7.50 and $7, respectively.

Since hitting a two-year high of $9.65 on Jan. 31, Sprint shares have struggled in a channel of lower highs and lows, losing roughly 39%. Despite the equity's recent price action, options traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been upping the bullish ante of late. Sprint's 10-day call/put volume ratio of 12.20 ranks in the 94th percentile of its annual range, meaning options players have bought to open calls relative to puts at a faster-than-usual clip during the past two weeks.

T-Mobile Will 'Continue Successful Growth Strategy'

Shares of T-Mobile are also trading lower as a result of the terminated merger talks, with the equity last seen down 5.4% at $55.71. Majority owner Deutsche Telekom said T-Mobile "plans to continue its successful growth strategy" in the U.S. Following Saturday's announcement, Citigroup and Evercore ISI cut their respective price targets on TMUS stock to $75 and $68.

T-Mobile stock touched a record high of $68.88 in early May, but has since retreated to below its year-to-date breakeven level, trading at 2017 lows. TMUS shares could be vulnerable to additional price-target cuts and downgrades, too, as 16 of the 20 analysts following the stock rate it a "buy" or better.

CYH Sees More Price-Target Cuts After Disappointing Earnings

Community Health Systems stock is trading fractionally higher at $4.41, despite Cantor Fitzgerald and Deutsche Bank cutting their price targets to $6 from $7, and to $4.50 from $8, respectively. The price-target cuts follow a handful of bearish analyst notes that flooded in late last week, after the company posted a bigger-than-expected third-quarter loss and lowered its full-year revenue forecast.

Down roughly 21% year-to-date, and within pennies of its November 2016 all-time lows, short sellers are likely cheering CYH stock's recent price action. Short interest grew 7.9% during the most recent reporting period, to 26.33 million shares, or nearly a quarter of the equity's total available float. At CYH stock's average daily trading volume, it would take more than eight sessions to cover the shorted shares.

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