MetroPCS Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of low-cost wireless service provider MetroPCS (NYS: PCS) plummeted 30% Tuesday after its quarterly results missed analyst expectations.

So what: Thanks to higher costs and lower-than-expected subscriber growth, MetroPCS posted second-quarter earnings of just $84.3 million, or $0.23 per share, versus the average analyst estimate of $0.28 per share. The shares have surged over the past year on strong revenue, profit, and new customer growth, so today's miss comes as an extra-big disappointment to Wall Street.

Now what: The weak economy, along with increased competition from the likes of Sprint Nextel (NYS: S) and T-Mobile USA, should continue to weigh heavily on the company's subscriber count. In fact, rival Leap Wireless (NAS: LEAP) is also down big today as investors run from the frightening low-end space altogether. Of course, when you consider that MetroPCS now trades at a forward P/E of roughly 8, the risks might finally be baked into the price.

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At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

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