UPDATE: J.P. Morgan Downgrades Leap Wireless International to Underweight, Reiterates $5 PT on Subscriber Trends, Competition, Cash Flow

In a report published Monday, J.P. Morgan analyst Philip Cusick downgraded the rating on Leap Wireless International LEAP from Neutral to Underweight, but reiterated the $5.00 price target. In the report, Cusick noted, “We are downgrading Leap Wireless from Neutral to Underweight based on weakening subscriber trends, increasing competition, and challenging cash flow. The company's mostly 3G-level products and network seem more and more commoditized as MVNOs get more aggressive in the prepaid smartphone data space, and without a sufficient capex budget Leap has little ability to make the transition to 4G service. We expect TMobile to launch its MetroPCS brand across a number of Leap markets before the end of the year, and most of the footprint by the end of 2014. Additionally, we expect AT&T to launch a new prepaid brand, ‘AT&T All in One' in May/June that will target not only Leap subscribers, but its dealers as well. Finally, we don't expect any M&A this year. We downgrade to Underweight with a $5 price target.” Leap Wireless International closed on Friday at $6.22.