Morgan Stanley: Inteliquent's Top-Line and Margins Remain Pressured

In a research report released earlier today by Morgan Stanley, Inteliquent's IQNT top-line and margins remain pressured, even after its attempt at rebranding as Inteliquent. According to Morgan Stanley, “Inteliquent continues its long-term strategy to diversify its revenue stream away from the legacy voice products that gave it the former “Neutral Tandem” name and into data products that have benefited many Enterprise-exposed carriers. IP transit continues to experience rapid demand growth while newly the introduced EtherCloud product has recently partnered with Equinix. However, the company's top-line and margins remained pressure as the take-rates of these newer products cannot offset the decline in legacy voice. IP transit pricing has stabilized from the quick declines seen earlier, but the higher cost profile still pressures EBITDA relative to the high-margin Local Transit product. Positively, the company continues to generate strong free cash flows with net cash per share coming in at $2.63 in 3Q11.” Morgan Stanley maintains its Equal-weight rating on Neutral Tandem, which closed Friday at $11.17.