Softbank Slumps On Sprint, But How About Alibaba Bump?

By Shuli Ren

Softbank's (9984.TO) shares dipped 2.9% in recent trading after the Japanese Internet company cut its full-year profit forecast by 10% on widening losses in its U.S. telecom Sprint (S). Overnight in New York, shares of Sprint tumbled 16.5%.

Analysts tend to use sum-of-the-parts analysis to value Softbank, an Internet conglomerate with assets from Japanese telecom to investments in India's e-commerce.

Based on the way its shares are going today, investors are certainly paying no heed to sum-of-the-parts.

Softbank's 30% stake in China's e-commerce Alibaba Group (BABA) is a lot more valuable than its 80% control over Sprint. Based on Monday's New York close (before all the profit warnings came), Softbank's Alibaba's stake is worth 4,880 yen per share, or about 60% of Softbank's share value, and its Sprint stake is worth 1,700 yen, or about 21% of Softbank's value. If sum-of-the-parts holds, Softbank should be down just about 1% today (math: 60%*4.2%-21%*16.5%), assuming investors are not valuing its Japanese telecom differently. Alibaba jumped 4.2% yesterday in New York after better-than-expected third-quarter earnings.

Plus, analysts have come to Sprint's rescue, saying its turnaround is only deferred, not shelved. See Tiernan Ray's blog "Sprint Plunges 19%: Turnaround Deferred? Cowen Defends the Strategy."

Perhaps Softbank is oversold?

See also "Softbank's Rising Son To Score With Triple-Play".

 

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