UPDATE: Morgan Stanley Downgrades Inteliquent to Underweight on Limited Outlook

Morgan Stanley reduced its rating on Inteliquent

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.