On Jun 21, we maintained our Neutral recommendation on
Leap Wireless International Inc.
). In the recently concluded first quarter, the bottom line
missed the Zacks Consensus Estimate but the top line outpaced the
Leap Wireless remains one of the low-cost wireless service
providers in the U.S., which enables it to rollout a range of
cheap service plans, starting at a low of $35 per month. The
company made its popular Muve Music service available to all
Android-based smartphones at no extra cost and without any
Currently, Leap Wireless is focusing on upgrading its existing
customers by selling Android-based smartphones, which will not
only drive the company's top-line sales but will also help in
retaining and adding customers.
During the quarter, Leap Wireless launched 3 4GLTE-based
smartphones (inclusive of HTC One SV smartphone) along with Muve
Music version 3.0 integrated with international calling features.
In fiscal 2013, the company plans to introduce five new
4GLTE-based smartphones inclusive of the popular Samsung Galaxy
S4 and also sets a target to extend its LTE-covered POPs by 10
million from its existing 21 million.
However, continued loss of subscribers coupled with significant
increase in promotional activities may weigh heavily on
profitability. Moreover, a highly leveraged balance sheet may
limit the company's 4GLTE deployment objective as it requires a
lot of funds. Meanwhile, the stock price plummeted 42% in the
last year and we believe that Leap Wireless is currently fairly
Leap Wireless carries a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks in this sector like
Sprint Nextel Corp.
T-Mobile US, Inc.
) are set to gain from the robust growth of LTE deployments in
the upcoming days. These companies will declare their
fourth-quarter results next month.
Currently, TELUS Corporation has a Zacks Rank #2 (Buy) while both
Sprint and T-Mobile US have a Zacks Rank #3 (Hold).
LEAP WIRELESS (LEAP): Free Stock Analysis
SPRINT NEXTEL (S): Free Stock Analysis Report
T-MOBILE US INC (TMUS): Free Stock Analysis
TELUS CORP (TU): Free Stock Analysis Report
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