Leap Wireless International Inc. (Nasdaq: LWIN) jumped more than 40 percent Monday after Morgan Stanley Dean Witter initiated coverage with a market "outperform" rating and a $30 price target.
Shares of the wireless communications carrier were up 5 1/8 to 19 13/16. The company is a wholly-owned subsidiary of Qualcomm Inc. (Nasdaq: QCOM), which was down 11 5/8 to 154 1/16. Leap, headquartered in San Diego, Calif., deploys, owns and operates wireless networks in domestic and international markets.
While the price target for Leap represents "significant upside (roughly 100%) from its current trading level, we have assigned an outperform rating, rather than a strong buy, primarily due to the early-stage nature of its operations," according to a research note, which a trumpeted Leap's position to benefit from the acceleration of wireless markets worldwide.
"We believe that the recent weakness in Leap's stock price is probably more of a function of a fact that the stock is underfollowed by the Street (currently only one brokerage firm is actively covering the stock) than on fundamentals of its operating units," said Coletee Fleming in a written report.
In June 1998, Qualcomm created Leap Wireless, which began trading in September 1998. In September 23, 1998 all outstanding shares of common stock of Leap were given to Qualcomm's stockholders.
On Sept. 8, the company announced a joint venture with Mexican company Pegaso PCS to launch an all-digital wireless service in Monterrey, Mexico. Monterrey is the third major market in which Pegaso has launched its service this year, following Tijuana and Guadalajara. Pegaso said it plans to launch service in Mexico City by the end of the year.
Harvey P. White is chairman and CEO of Leap and CEO of Pegaso. With a planned initial investment of approximately $1.3 billion, Pegaso PCS is deploying the first 100% digital network in Mexico.
On September 7, Leap Wireless was also initiated with a rating of "outperform" by Kevin M. Roe of ABN AMRO.