On Dec 27, we maintained our Neutral recommendation on
Leap Wireless International Inc.
). In the recently concluded third quarter, both its top and
bottom line missed the corresponding Zacks Consensus Estimate.
ID SYSTEMS INC (IDSY): Free Stock Analysis
INTELIQUENT INC (IQNT): Free Stock Analysis
LEAP WIRELESS (LEAP): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
To read this article on Zacks.com click here.
Why the Reiteration?
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
contract terms. Moreover, introduction of a new Phone Payment
Plan scheme through which customers can purchase handsets at a
minimal down payment without any interest or credit profile
evaluation will further boost the company's top-line growth.
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 but will also help in retaining
and adding customers.
Samsung's 3G-based Galaxy Discover and 4G-based Galaxy Admire 2
are powered with the latest 4.0 Muve Music version. In fiscal
2013, the company plans to introduce five new 4GLTE-based
smartphones inclusive of the popular Samsung Galaxy S4 and also
targets 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 on profitability.
Moreover, a highly leveraged balance sheet may limit the
company's 4GLTE deployment objective as it requires a lot of
funds. Moreover, the stock price soared 231% in the last year and
we believe that Leap Wireless is currently fairly valued.
Meanwhile, AT&T, Inc. has decided to acquire Leap Wireless
completely for nearly $1.2 billion or $15 per share. At present,
the transaction is awaiting regulatory approvals and is expected
to be complete by the end of the first quarter of fiscal 2014.
Currently, Leap Wireless carries a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other stocks in this sector like
ID Systems Inc.
) are set to gain from the robust growth of LTE deployment in the
Currently, all three have a Zacks Rank #2 (Buy).