UPDATE: Morgan Stanley Downgrades Inteliquent to Underweight on Limited Outlook
Morgan Stanley reduced its rating on Inteliquent (NASDAQ: IQNT) from Equal-weight to Underweight and established a new $2 price target.
Morgan Stanley noted, "In September, IQNT's CFO and COO both resigned. Also, during 3Q12 earnings, IQNT announced a preliminary settlement with a large carrier customer that will result in less favorable rates. New 2012 guidance implies a 4Q12 EBITDA margin of 8.7% at the midpoint, a 1,648 bps Q/Q drop. The settlement also increases IQNT's pass-through costs for terminating calls to the carrier, which may result in other customers leaving due to higher rates. … These results, coupled with capital intensity of ~10% should significantly reduce FCF. Lastly, though IQNT has been attempting to diversify its revenues since 2010 towards data, we see little evidence yet of concrete action."
Inteliquent closed at $3.51 on Friday.
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