Virgin Mobile shares tumble after 2Q forecast disappoints

The U.S. wireless unit of Richard Branson's Virgin Group, which went public at $15 per share last October, said it expects to lose between 130,000 and 160,000 net subscribers during the second quarter.

"Virgin Mobile beat our low expectations for the first quarter, but the second- quarter guidance was well below our forecast," wrote Soleil Securities analyst Todd Rethemeier in a note to investors, keeping a "Hold" rating on the stock.

For the quarter ended March 31, Virgin Mobile posted a profit of $4.7 million, or 7 cents per share, down from a profit of $19.2 million, or 38 cents per share, in the same period a year earlier.

Revenue fell 4 percent to $326.8 million from $339.3 million.

Analysts, on average, were expecting a profit of 4 cents per share on sales of $317.2 million, according to a poll by Thomson Financial.

The company added just 17,772 net customers during the quarter, down from 309,721 in the year-ago period. Its average revenue per user, which tracks the average monthly revenue from its subscribers, fell to $19.93 from $22.41 a year earlier.

Rethemeier recommended that investors "continue to avoid the stock."

"We can easily imagine a scenario where Virgin is marginalized by prepaid competitors and goes into a tailspin, losing a couple hundred thousand customers per quarter until it goes out of business," he wrote, noting that he is not forecasting this scenario, but "it is not out of the realm of possibility."

The company forecast second-quarter results between a loss of 1 cents and a profit of 3 cents per share. Analysts polled by Thomson Financial are expecting a profit of 12 cents per share. Analysts typically exclude one-time items from their estimates.

Shares of Warren, N.J.-based Virgin Mobile fell 32 cents, or 8.5 percent, to $3.43. The stock has traded between $1.90 and $16.63 since its IPO.