Leap Wireless Guidance Doesn’t Cut It Today (LEAP)

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Leap Wireless International, Inc. (NASDAQ:LEAP) posted earnings that are being viewed with disappointment initially.  It posted $0.05 EPS on revenues of $393.2 million, and that looks light on the top-line.  First Call estimates were $0.04 EPS on revenues of $408 milllion, although there was a very wide range of estimates.  The wireless operator added 127,000 net customer adds, barely above the low-end of the previuous range offered of 125,000 to 175,000.  Its churn rate was 4.3% and it had previously offered 4.1% to 4.4% estimates.

For next quarter it sees 40,000 to 120,000 net susbcriber adds and a churn rate of 4.9% to 5.4%, so subscriber growth slowed and churn is expected to grow. For 2007 it sees Adjusted OIBDA of $430 to $460 million, which is higher on the low-end and lower than the high-end previously offered for fiscal guidance.  First Call has estimates of $429 million revenues next quarter and Fiscal 2007 is expected at $0.22 EPS and $1.67 Billion revenues.  The company is offering some initial 2008 targets: now targets 73 to 81 million POPs by end of 2008; adjusted OIBDA of $550 to $650 million and sees cap-ex $650 to $850 million.

Shares are now down 13% in immediate after-hours reactions.  Unfortunately, the trends it is seeing are not exactly defining the company as a cheap stock on its current growth potential.  At least that is the case from what it had telegraphed and where Wall Street estimates are.  Shares are down some 13% around $70.00 in after-hours, and that took out the lower-end of that chart support band. 

Jon C. Ogg
August 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.