Nextel at $10 Is A Bargain

(Disclosure: Author owns NXTL securities) 90 days ago, Wall Street consensus put Nextel's 2003 earnings at -$.26 per share. 60 days ago? -$.06 per share. 30 days ago? $.01 per share. 7 days ago? $.11 per share. Today? $.32 per share. The #5 U.S. Wireless provider's 10.3 million customers and its #1 customer growth rate imply its passing #4 Sprint PCS is almost a given during the next few months. While Sprint PCS shrunk last quarter and Verizon's growth is slowing, Nextel has been adding over 100,000 customers per month. It's churn rate (2% customer loss per month) is the lowest in the industry, solidifying it's long-term market share gains. More good news. Nextel is the only major service with one button "walkie talkie" direct connect services that come free to most customers. Customer service ratings are improving, and its network of independent dealers is bloodying the nose of competitors--particularly Sprint PCS. Nextel brags the top spot with corporate customers are businesses who sign up scores of employees and don't churn easily. Nextel's $71 average revenue per customer per month is 30% higher the industry average. In 2003, I feel that Nextel consensus number will continue to rise above $.50 per share, giving it a current multiple just north of 20 times 2003 earnings. It's not a stock without its risks, so an inexpensive protective put may be a good idea for large positions. I am looking for a rise 50% to 100% over the next 12 months. Investor's Business Daily's Reinhardt Krause summed it up best, "Nextel, which focuses on business customers rather than consumers, added 480,000 net subscribers in the third quarter. That's about par with the year-earlier quarter. The company is doing better than most other U.S. carriers. No. 2 Cingular Wireless and Sprint PCS both lost customers in the third quarter, and subscriber growth at AT&T Wireless fell 73%."