They have updated their Leap model taking into consideration 2Q results, 3Q07 2007, and 2008 guidance provided by the company, and follow-up conversations with management. New 2007 EBITDA estimate is $413 million vs. previous $448 million. This represents 51% Y/Y '07 EBITDA growth. Firm anticipates 40% growth in 2008, including new, AWS market launch costs.
They believe Leap Wireless remains an attractive investment opportunity, more so following its sharp correction on the back of 2Q results. Leap is a solid and proven business model (~30% EBITDA margins, over 40% in core markets) expanding covered pops in 2008 by 45% where financial growth expectations (39% '07-'10 EBITDA CAGR, including $100 million of launch costs in 2008) justify a premium valuation, in firm's view, relative to national postpaid wireless carriers and the telecom sector generally.
Maintains Buy and $100 tgt.
Notablecalls: Expect this call to generate some interest in LEAP.