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Sprint's (NYSE:S) iPhone 5 Risks Don't Include Bankruptcy

"Sprint's recently ready access to credit has greatly diminished its near-to-medium term bankruptcy risk," writes Moffett. "From here, Sprint will have to show that it really can pull off a turnaround in fundamentals -- that is, can it sustainably gain share and grow?" asks Moffett. He isn't optimistic.

Citing a continued network disadvantage to competitors AT&T and Verizon and the prospect that profit margins drop sharply in coming quarters, Moffett holds an underperform rating and a $3 price target on Sprint shares. With the launch of the iPhone 5, those issues may come to a head for Sprint as financing fears recede.

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"Even after Network Vision is completed, we believe its LTE network will be badly disadvantaged, likely to be highlighted by the iPhone 5. Sprint's high ARPU growth appears poised for rapid deceleration," writes Moffett.

In March, Moffett wrote in a research note that bond investors were pricing in a 50/50 probability of a bankruptcy filing by Sprint over the next five years as the nation's third leading wireless carrier struggles to build a next generation wireless. At that time, Moffett ascribed a $2.50 price target for Sprint -- less than half of current share prices after a 130%-plus year-to-date rally.

Moffett highlighted two scenarios in March for Sprint playing out with investors split evenly on the company's prospects, as it spends billions to build a nationwide 4G network.

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