Leap Wireless Shares Jumped: 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 Leap Wireless (NAS: LEAP) leaped as high as 13% on Wednesday after Bernstein Research analyst Craig Moffett upgraded the wireless service specialist from market perform to outperform.
So what: Along with the upgrade, Moffett offered a new price target on the stock of $12, representing a whopping 70% worth of upside to yesterday's close. The stock has been battered over the past few months -- down over 50% since the start of July -- on unexpectedly high churn rates, so today's rally serves as a much-needed boost for embattled Leap bulls.
Now what: I wouldn't get too excited over the stock just yet. While Leap -- as well as close rival MetroPCS (NYS: PCS) -- may be benefiting somewhat from an industrywide trade-down, its high debt load, steadily declining operating margins, and long history of inefficiency are just too worrisome for a long-term commitment. More short-term pops are certainly possible, especially with all the uncertainty surrounding the proposed AT&T (NYS: T) and T-Mobile deal, but betting big on them doesn't seem prudent.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of AT&T. 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's disclosure policy always gets a perfect score.
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