Leap sinks after 1Q results, Citi downgrade
Shares of Leap Wireless International Inc. took a hit Friday after the provider of low-cost, prepaid wireless service posted a wider first-quarter loss and was downgraded by Citi Investment Research.
After the market's close Thursday, the company posted a loss of 90 cents per share; analysts polled by Thomson Reuters had been expecting a loss of 66 cents per share. The company's revenue increased, but operating costs did too, by 9 percent to $647.4 million.
Citi Investment Research Analyst Michael Rollins downgraded Leap's shares to "hold" from "buy" and removed the company's shares from Citi's "Top Picks Live" list. He cited a 27 percent increase in the company's share price since January as a reason for the downgrade
In addition, Rollins said there are few short-term catalysts for Leap's subscriber growth to do better than seasonal patterns for the next three to six months. He lowered his target price on the stock to $24 from $20.
"Unfortunately, the economic backdrop and the competitive environment are not stabilizing fast enough to provide Leap with the operating momentum necessary to exceed consensus revenue over the next six months," the analyst wrote in a note to investors.
Shares of Leap fell $2.65, or 16 percent, to $14.13 in afternoon trading. The stock has traded in the 52-week range of $11.98 and $42.47.
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