MetroPCS Communications Inc. (PCS:US) and Leap Wireless International Inc. (LEAP:US) fell the most since August in New York trading after JPMorgan Chase & Co. downgraded the pay-as- you-go wireless carriers, citing increased competition.
Analyst Mike McCormack reduced the stocks to “neutral” from “overweight,” saying average revenue per unit may fall and the companies may not be able to keep profit margins at their targets of around 40 percent. The carriers are under mounting pressure as competitors such as Sprint Nextel Corp. expand into the prepaid market.
“The industry faces secular challenges, with high penetration and heavy competition causing downward movement on price and increased acquisition costs,” McCormack wrote in a note to clients today.
Dallas-based MetroPCS slipped 8.9 percent to $8.53 at 3:20 p.m. in New York Stock Exchange composite trading while San Diego-based Leap declined 10 percent to $17.55 on the Nasdaq Stock Market.
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