Buy Alert: October 4, 2012

Marcus Haber | October 4, 2012

Buy Alert: October 4, 2012

Trade Details

Buy Sprint (S) November $5.50 Calls for $0.30 or better

Why?

Sprint shares have been on a nice run since June – at one point more than doubling in price. The big move was mostly driven by fundamentals. In a nutshell, the company’s brand recognition is on the rise with the introduction of the iPhone. Plus, iPhone sales have been better than expected.

Perhaps more importantly, the company’s sizeable cash position (over $6 billion) has put them in prime position for a merger or acquisition.

However, the recent announcement that T-mobile is likely buying MetroPCS (PCS) sent Sprint shares down 12% in a matter of a couple days. Not only does it mean PCS is off the market, it also could result in T-Mobile becoming a stronger competitor.

Here’s the thing…

There are plenty of good acquisition targets out there and Sprint still has plenty of cash. Moreover, the company’s improving fundamentals haven’t changed a bit. I expect S will be back over $5.50 within the next couple weeks – or sooner.

Let’s grab some cheap Sprint calls while we have the chance.