Nomura Blasts Leap Wireless (LEAP)

August 8, 2012 12:05 PM EDT
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Price: $17.52 --0%

Rating Summary:
    4 Buy, 22 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 10 | Down: 16 | New: 50
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Today Nomura Securities maintained a Neutral rating on Leap Wireless (NASDAQ: LEAP) and cut their price target of $5.00 (from $6.00).

Analyst Mike McCormack said he will be closely watching cash burn following the company's most recent failed strategy.

"Leap’s growth strategy has been defined by low margin ARPU, poor execution and a lack of FCF generation," said McCormack. "Unlike peer MetroPCS, which also experienced the same poor macro environment, Leap did not deliver strong margins usually resulting from muted gross adds. While MetroPCS management chose to run their business to maximize cash returns in a seasonally weak quarter, Leap attempted to compete, and instead delivered lackluster margins and poor subscriber metrics."

During the call, Leap’s new CFO, Jerry Elliott said operating performance is not acceptable and that the company will institute significant strategic changes.

"Management stressed that all options to maximize returns on assets will be considered. Whether this implies a sale of parts, or the whole company, will be debated by investors adding some speculative support to the shares, despite the dour outlook on fundamentals," added McCormack.

For an analyst ratings summary and ratings history on Leap Wireless click here. For more ratings news on Leap Wireless click here.

Shares of Leap Wireless closed at $4.49 yesterday.

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