How Low Can MetroPCS Go?

Shares of MetroPCS (NYSE: PCS  ) hit a 52-week low today. Let's look at how it got here and whether dark clouds are ahead.

How it got here
The fifth-largest wireless carrier hit a low just over a month ago, yet here we are again, continuing to push lower.

The most important development that's happened since then is that Apple has jumped into the prepaid wireless market, except MetroPCS didn't get an invite. Instead, Apple partnered with MetroPCS prepaid rival Leap Wireless (Nasdaq: LEAP  ) and its Cricket brand to offer a contract-free iPhone.

Leap is taking a leap of faith here, because it's subsidizing a contract-free phone, so subscribers could sign up and jump ship with a discounted iPhone. A 16-GB iPhone 4S is available for $500, about $150 off the standard retail price. That's still a hefty upfront cost, but Leap's $150 contract-free subsidy is much lower than the roughly $450 that larger carriers pay.

Sprint's (NYSE: S  ) Virgin Mobile prepaid brand followed up and will be getting its hands on the device starting later this month, offering even more affordable service plans, with no subsidy at all.

In the meantime, MetroPCS probably feels an awful lot like T-Mobile right about now, hoping to target unlocked iPhone users when an LTE model is released later this year.

How it stacks up
Let's see how MetroPCS stacks up against its peers in the wireless carrier business.

PCS Chart

PCS data by YCharts

Let's see how their fundamentals compare.

Company

P/E (TTM)

Sales growth (MRQ)

Net margin (TTM)

ROE (TTM)

MetroPCS 8.2 6.9% 5.4% 9.4%
Leap Wireless NM 5.9% (10.5%) (47.6%)
Sprint NM 5.1% (9.7%) (26.8%)
AT&T (NYSE: T  ) 50.6 1.8% 3.4% 3.8%
Verizon (NYSE: VZ  ) 46.2 4.6% 9.7% 7%

Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter. NM = not meaningful.

Larger AT&T and Verizon are clearly doing better than the rest of the industry, partially due to their focus on the more lucrative post-paid segment. Sprint has always played third fiddle in that market, but its recent iPhone invite should help stop its bleeding. MetroPCS has performed slightly better than Leap in that it's not down as much, and is actually profitable.

What's next?
Missing out on the iPhone as it gets into the prepaid market is a major disadvantage for MetroPCS, so the pain may not be over yet.

Add these carriers to your watchlist to get the latest.

Fool contributor Evan Niu owns shares of Apple, Verizon Communications Com, and AT&T, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.
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  • Report this Comment On June 15, 2012, at 12:44 PM, jhf678 wrote:

    I think it is about to bottom out with their new plan $25/m unlimited talk and text.

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