Sprint Short Squeeze Could Be Short-Lived

Despite today's pop, resistance still looms for Sprint stock

Feb 2, 2018 at 10:24 AM
facebook twitter linkedin

Sprint Corp (NYSE:S) is set to end the week on a high note, with the stock up 4.4% to trade at $5.32 on the heels of a well-received earnings report. The wireless carrier reported fiscal third-quarter earnings of $7.16 billion, or $1.79 per share, on net operating revenue of $8.24 billion. On an adjusted basis, Sprint earned 3 cents per share. By contrast, analysts were bracing for a quarterly loss of 4 cents per share on $8.15 billion in revenue.

Adding to the bullish momentum, Sprint upped its fiscal 2017 guidance for operating income and free cash flow. The company is predicting operating income of $2.5 billion to $2.7 billion, well above its previous guidance of $2.1 billion to $2.5 billion; meanwhile, free cash flow is now expected to weigh in between $500 million and $700 million. Previously, Sprint had expected to break even.

Despite today's rally, though, S remains in dire straits on the charts. The stock is down about 37% year-over-year, and is pinned below familiar resistance at its 20-day and 50-day moving averages. The latter trendline hasn't been surmounted on a daily closing basis since late September.

Given the equity's bleak price action, it's no surprise to find quite a bit of pessimism priced into S shares. Short interest ramped up by 15.7% in the most recent reporting period, and now accounts for 16.8% of the stock's float -- or 5.9 times Sprint's average daily trading volume.

We could be seeing some of the weaker bearish hands hit the exits following the earnings beat, but unless S can snap out of its longer-term slump, many of these short sellers are likely to remain firmly entrenched. In the same vein, 18 out of 19 analyst call Sprint a "hold" or "sell," but there's been not one upgrade or price-target hike as of yet in response to the upwardly revised forecast.


If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!



Special Offers from Schaeffer's Trading Partners