S&P Picks and Pans: Sprint Nextel, Disney, DirecTV, Synchronoss

S&P REITERATES HOLD RECOMMENDATION ON SHARES OF SPRINT NEXTEL (S; 9.51):

Sprint announced it will combine its WiMAX business with Clearwire (CLWR; 16.46), along with a $3.2 billion investment from a group of cable and other entities. We believe the entity is worth roughly $14.4 billion and Sprint will retain about 51% ownership in it. Overall, we see this as favorable for Sprint, since it brings in capital to fund a nationwide buildout and allows Sprint management to refocus on rebuilding its brand. While this is positive, we believe Sprint still has work to do on retaining subscribers. We maintain our 12-month target price of 10, based on 5.8 times our 2008 EBITDA forecast. -J. Moorman, CFA

S&P MAINTAINS STRONG BUY OPINION ON SHARES OF WALT DISNEY (DIS; 33.73):

After Disney's solid March-quarter, CEO Iger alluded to improved adaptability and resilience of theme parks to economic downturn, which we see as a key risk factor. Advance bookings are still holding up, although the Easter shift should distort June-quarter. Overall trends at ESPN, ABC [post-writers strike] and the film studio seem strong, with summer film slate anchored by Chronicles of Narnia 2 and Pixar's Wall-E. We see some risk on reclamation of the North America Disney Store retail chain, previously licensed to Children's Place (PLCE; 27.70). We keep our sum-of-the-parts-based target price at 45. -T. Amobi - CPA, CFA

S&P MAINTAINS HOLD OPINION ON SHARES OF DIRECTV GROUP (DTV; 25.80):

First quarter EPS of $0.32, on 7% fewer shares, vs. $0.27, matches our estimate and beats Street's by $0.01. U.S. net adds of 275,000 are well above target, with 1.36% monthly churn a 10-year low, suggesting tightened credit policy is taking hold. But HDDVR rollout evidently weighed on higher-than-expected subscriber acquisition, retention/upgrade costs. Liberty Media (LINTA;15.70) agrees to limit its voting power to its current 47.9% DTV stake. DTV sets added $3 billion stock buybacks. First quarter call could comment on near-term strategy and long-term leverage target under LINTA's effective control. -T. Amobi - CPA, CFA

S&P DOWNGRADES OPINION ON SHARES OF SYNCHRONOSS TECHNOLOGIES TO HOLD FROM BUY (SNCR; 22.90):

Shares trade sharply lower after SNCR reports first quarter EPS of $0.13, vs. $0.11, $0.03 below our estimate. Revenue rose 36% to $29.1 million, $1.8 million below our view. The company cites slower revenue from AT&T (T; 39.60), as some potential customers are using other carriers for unlocking their iPhones. While SNCR has signed new contracts, we expect lower revenues due to a reduced number of activations and reduced service level agreements. We are cutting our 2008 EPS forecast to $0.41 from $0.87, and our target price to 14 from 28, on our lower earnings and growth outlook. -J. Yin