Sprint Nextel shares rise as analyst upgrades

NEW YORK - Shares of Sprint Nextel Corp. climbed modestly Monday afternoon after an analyst with Auriga USA LLC upgraded the wireless provider, citing improved expectations for subscriber losses.

Chandan Sarkar upgraded Sprint to "Buy" from "Hold" and boosted his target price to $7 from $5.50.

The company's shares climbed 10 cents, or 2.3 percent, to $4.42 in afternoon trading. Sprint is still down about 15 percent since June 18, the last time it closed above $5.

Sarkar said while the shares remain "wildly volatile," his upgrade is based on ongoing strong demand for the company's Boost prepaid service, combined with an expected slowdown in the loss of contract subscribers starting in the second half of the year. The Boost service, which requires no contracts, has been popular during the economic downturn.

Sprint's April and May subscriber losses may have been worse than Wall Street had expected in part because of the pending release of the Palm Pre, Sarkar said. But the analyst added shipments of the highly anticipated smart phone were stronger in June than he had predicted.

Sarkar said he now thinks Sprint added 350,000 data plan subscribers tied to the Pre, up from his earlier estimate of 250,000. Based on this, he lowered his contract subscriber loss estimate to 1.1 million from 1.3 million for the June quarter. For the current quarter, he now expects subscriber losses of 800,000, down from an earlier estimate of 1.1 million.

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