Leap Wireless (NASDAQ:LEAP) has demonstrated its extreme sensitivity to catalysts over the past few weeks. The stock price has rolled up and down dramatically as different analysts offer different perspectives on how valuable they believe are the company’s spectrum holdings.
On December 10, after the stock fell 10 percent in 3 days, an analyst at Guggenheim Securities suggested that there’s a high chance MetroPCS (NYSE:PCS) or T-Mobile USA would bid for Leap after the two companies completed their merger. The call was backed by comments from T-Mobile CEO John Legere, who said that a transaction with Leap would make a lot of sense, given its spectrum assets and synergies.
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The stock climbed 12.2 percent in 2 days as a result, a respectable bump for any analyst call. The analyst at Guggenheim raised his price target from $7 to $8.50, estimating that a buyout could run as high as $10 per share.
But the stock has fallen off the other side of the speculation mountain over the past five trading days…
Leap’s stock has come down over 14 percent since the end of last week. Shares dropped nearly 7 percent alone on Thursday following another analyst note, this time from Jefferies. The analyst there cut his rating on the stock from “Hold” to “Underperform,” and lowered his price target from $6 to $5, for the exact opposite reason the analyst from Guggenheim made his call.
“In our view, Leap is not a ‘must-have’ asset in the ongoing industry consolidation,” wrote the analyst. There are just two major markets, Houston and Phoenix, where Leap’s spectrum fills an area under served by T-Mobile’s current service. For the same reasons the analyst thoroughly discounts any interest by Sprint (NYSE:S), leaving the company high and dry.
The analyst’s bearish note was echoed by Jim Cramer, who also doesn’t think a takeover is happening any time soon. Nearly every analyst who covers the stock has a “Hold” rating, and the average price target is $6.70. The company is expected to report a fourth-quarter loss of $1.61 per share on February 15.
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