UPDATE: J.P. Morgan Downgrades Leap Wireless to Neutral

J.P. Morgan is out with its report today on Leap Wireless LEAP, downgrading LEAP from Overweight to Neutral. In a note to clients, J.P. Morgan writes, "We are downgrading Leap Wireless to Neutral from Overweight. Our price target remains the same, at $16 per share, based upon our DCF analysis. We believe the last 2 weeks have begun the typical prepaid summer slowdown, which could be exacerbated this year by high gas prices around the country. While the shift to smartphones is a continued positive, we expect 2Q incremental smartphone shift to be less than 1Q's 10%, and it is also already well forecast by the Street. Both Leap Wireless and MetroPCS managements at JPM's TMT Conference this week highlighted the seasonality of the unlimited prepaid businesses, comments that match up with our checks of slowing store traffic. With the ~36% YTD appreciation of LEAP shares, now trading at 6.6x EV/2011E EBITDA, we move to the sidelines and await a better entry point or more optimal time to get more bullish." Shares of LEAP closed Thursday at $16.70, down 1.07% from Wednesday's close.