Clearwire shares received a boost last week after Macquarie analyst Phil Cusick raised his rating on the mobile WiMAX operator to "outperform" from "neutral," increasing his price target from$7 to $12. The company's stock closed on Friday at $8.21.
"Our confidence is higher primarily due to Clearwire's shift in the past six months to an experienced wireless team and operational focus, its building momentum, a high likelihood that it will be able to raise additional capital and an attractive valuation and asset base," Cusick said in a research note.
However, Cusick said he believes the company needs an additional $2.5 billion to $3 billion to complete its planned buildout to meet its planned coverage of 120 million pops. Cusick said Clearwire is likely to reach 225 million pops by 2016. He added that, according to management, the company needs visibility on the additional funding by the first quarter to continue building the network at its current pace. He said Sprint is willing to fund more than 51 percent of the required amount and that the other strategic partners are interested in putting up money too.
T-Mobile could be brought in to take a stake too, but Cusick said "this is not the first choice." The additional capital will be at a price accretitive to Clearwire's current stock price, he said.
Cusick said views Clearwire's role longer term to be that of mostly a wholesaler as partners Sprint, Time Warner and Comcast need 4G products to compete with Verizon and AT&T.
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