Why This Analyst Thinks Sprint Is Still Doomed by Aaron Pressman @FortuneMagazine July 29, 2016, 1:04 PM EDT E-mail Tweet Facebook Linkedin Share icons Sprint shares have been on a tear for the past few days, gaining 32% since it reported second quarter results on Monday, July 25. The fourth-largest U.S. wireless carrier surprised Wall Street analysts with a gain of 173,000 regular monthly phone customers in the second quarter—as well as $2.5 billion of adjusted earnings before interest, taxes, depreciation, and amortization. The results were some of the best since Japanese investor Masayoshi Son bought control of Sprint for almost $22 billion three years ago through his Softbank Group company. The surprise allowed the Softbank CEO to brag that the carrier’s turnaround was nearly complete. “Sprint is no longer dragging us down but is about to turn into a cash maker for us,” Son said on Wednesday after reporting Softbank’s own results. But not everyone in telecom-land is buying the turnaround. Veteran analyst Walt Piecyk says investors should sell the stock, which is only worth one-third the current $6.12 price. The recent rally has been fed by unsustainably low capital spending, confusion about the carrier’s actual cash flow, and misplaced optimism about future subscriber gains, Piecyk says. Get Data Sheet, Fortune’s technology newsletter. Sprint s spent only $375 million in the quarter on capital spending needs like improving its national wireless network infrastructure. That was about one-quarter what similar-sized competitor T-Mobile tmus spent and one-eighth what market leader Verizon vz spent. Sprint’s figure represented just 6% of revenue, a level that Sprint probably cannot sustain if it is to continue to improve its network to keep up with rivals, Piecyk said. “In our experience, operators invest 10% of service revenue when they are struggling, in the low to mid-teens during a normal period, and can spend in excess of 20% of revenue when in the midst of a major network upgrade cycle,” Piecyk wrote in a report on Sprint on Friday. While Sprint did show modest subscriber growth in the second quarter, compared with a net loss of subscribers in the same quarter of 2015, the carrier would have to grow at a much greater rate of about 750,000 per quarter, or three million per year, to reach a financially sustainable position, Piecyk argued. That would be extremely unlikely given that Sprint would draw much stronger competitive reactions from the larger carriers if it started to gain customers at that rate. Piecyk also questioned if Sprint could generate enough cash to pay down its hefty debt load on its own, as Softbank’s CEO has said. Sorting out the actual cash flow at Sprint and the other big wireless carriers has become increasingly complicated as they shifted their business models around smartphone sales. Instead of getting free or discounted phones, with the carriers subsidizing the full cost, most customers now buy the phones at full price and pay in monthly installments. For more on Softbank’s acquisition of ARM, watch: Sprint and its peers have then turned around and securitized those customer payments streams in return for up-front cash payments. Some customers at Sprint opt to lease their phones instead of buying them, leading to further accounting complications. “It can be confusing when companies and our peers claim a company is generating free cash flow and yet net debt rises,” Piecyk wrote. “Based on our definition of free cash flow, which would in fact reduce net debt, we do not believe Sprint will be able to be free cash flow positive in 2017 let alone by the end of this year as Sprint Chairman Masa Son has forecast.” Sprint rejected Piecyk’s analysis, noting that most other analysts are far more positive on the company. “Mr. Piecyk is certainly entitled to his opinion, but his opinion is clearly out of touch with nearly every other sell side analyst’s review of our business,” a spokesman said in a statement to Fortune. “Our network is performing at best-ever levels. This past quarter we added more customers than Verizon and AT&T and are narrowing the gap to T-Mobile and our churn was a record low for Sprint. We continue to reduce our operating costs. We have a well thought out plan to manage our liquidity and are executing against it.” Sprint is on a “pathway to become free cash flow positive” and Piecyk’s $2 stock price target is the lowest among 21 analysts who follow the company, the spokesman noted.