UPDATE: Deutsche Bank Downgrades Leap Wireless to Sell on Competitive Pressures, Rich Valuation

In a report published Monday, Deutsche Bank analyst Brett Feldman downgraded the rating on Leap Wireless International LEAP from Hold to Sell, but reiterated the $4.00 price target. In the report, Feldman noted, “Our downgrade reflects 2 factors. First, our concerns about escalating competition within the prepaid sector due to brand expansions by TMUS (MetroPCS) and AT&T (Aio). In light of these competitive moves, we are maintaining our below consensus 2013-2014 EBITDA estimates for LEAP. Second, we view valuation as rich. Due to LEAP's high debt load, the stock trades well above its peers (7.4x ‘14E EBITDA vs. comps at 4.7-7.0x) despite inferior growth prospects. With limited strategic options, in our view, we therefore see limited valuation support for LEAP's equity value.” Leap Wireless International closed on Friday at $5.87.