MetroPCS shares slip after Bernstein downgrade, analyst warns going gets tougher

MetroPCS shares slide after downgrade

NEW YORK — Shares of MetroPCS Communications Inc. slipped Monday after Bernstein Research analyst Craig Moffett downgraded the pre-paid wireless service provider.

THE SPARK: Moffett said MetroPCS has done very well recently, with its shares performing better than its rivals’ thanks to the solid execution of its strategy of providing low-cost services, and to overall strength in the pre-paid market. But, he said “the going gets harder from here,” as Metro’s stock price is high and Wall Street’s expectations are substantial.

The analyst downgraded MetroPCS to “Market-perform” from “Outperform.” Separately, he also cut the target price for rival Leap Wireless International Inc. to $15 from $23.

THE BIG PICTURE: Pre-paid wireless service providers have enjoyed a subscriber growth, taking advantage of cost-conscious cell phone owners looking to lower their monthly bills. But Moffett notes that, recently, pre-paid growth has “abruptly fallen off the table.”

THE ANALYSIS: “While PCS is inarguably the better operator for now, Leap appears to us to be the more attractive stock,” Moffett said. “Expectations are suitably low, and their new pricing plans are likely to bolster near-term results.”

SHARE ACTION: MetroPCS shares fell 22 cents, or 2.4 percent, to $8.89 in midday trading. Even so, the stock is up about 16.4 percent year-to-date.

Shares of Leap were unchanged at $10.20.