Friday’s trading session was a frenzy for investors of US Cellular (USM), as the stock jumped more than 93% – from around $17/share to more than $33/share. That being said, it appears the hype has died down over the weekend. The stock is gradually headed back toward earth, down 4.5% so far this morning.
All this comes after the company’s board of directors – in conjunction with Telephone and Data System’s board of directors – released a statement that they’re reviewing strategic options for the company. This is the type of jargon used when a company seeks an acquisition.
Chairman Walter C.D. Carlson said that the two boards believe the time is right for a comprehensive review of strategic alternatives for the company and that shareholder interest will be prioritized in selecting a path forward.
Citi has been hired as a financial advisor to try and help locate a buyer for the independent wireless company. US Cellular has been treading water for a while now, as the stock had fallen more than 45% in the past year leading into Friday’s news. It’s since recovered all those losses and then some.
That being said, an acquisition by one of the major wireless providers seems inevitable at this point – as US Cellular remains one of the final independent providers to be left standing.
The wireless industry has consolidated into just a few major players, and each of these companies will view US Cellular as an attractive asset. However, whoever does decide to purchase the company could face antitrust issues.
However, rival U.S. infrastructure companies as well as private equity firms will be interested in acquiring the company too. That’s because US Cellular has a network of towers to go along with its consumer business.
All things considered, a sale seems inevitable for USM. In the meantime, what should you do as a trader – is there an opportunity here in this stock? We’ve broken it down through the VectorVest stock analysis software and have 3 things you’re going to want to see before making your next move…
Despite Poor Upside Potential and Safety, USM Does Have Excellent Timing...
The VectorVest system simplifies your trading strategy by giving you all the insights you need in just 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT).
Each of these sits on its own scale of 0.00-2.00, with 1.00 being the average. Pick stocks with ratings above the average to win more trades with less work.
Or, better yet, follow the clear buy, sell, or hold recommendation the system offers based on the overall VST rating for any given stock, at any given time. As for USM, here’s what’s going on right now…
- Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (projected three years out) to AAA corporate bond rates and risk. This offers far better insights than a simple comparison of price to value alone. As for USM, the RV rating of 0.60 is poor. And, after gaining 94% last week, the stock is now overvalued - with a current value of just $17.68
- Poor Safety: In terms of risk, the stock has poor safety as well - with an RS rating of just 0.82. This rating is calculated through a detailed analysis of the company’s financial consistency and predictability, debt-to-equity ratio, and business longevity.
- Excellent Timing: The one thing USM has going for it right now is the strong positive price trend that formed as a result of Friday’s news. While the hype around this stock may not be rooted in reality and is more a result of investor sentiment, there’s no denying the excellent RT rating of 1.65. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating for USM is 1.17 - which is good, but is this just skewed by the excellent RT rating? Does excellent timing outweigh poor upside potential and safety, or is it the other way around?
If you’re considering trading USM, don’t make your next move based on emotion or guesswork. Get a clear answer on whether you should buy, sell, or hold USM stock through a free stock analysis at VectorVest to execute your trades with complete confidence and clarity!
Want These Types of Insights at Your Fingertips so You Can Win More Trades?
Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.
VectorVest advocates buying safe, undervalued stocks, rising in price. There’s no question that USM has excellent timing after shooting up 94% on news of exploring “strategic alternatives”, but the stock does have poor upside potential and safety right now.
Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!