Stock of the Day
|
Level 3 Communications (LVLT)
Level 3 Shares Rise on Higher 2006 Forecasts
On a day where the major indices remained more or less unchanged in the face of a looming interest rate hike, shares of the telecom company Level 3 Communications rose more than 14 percent. Also, just last week the company received a major upgrade from Bear Stearns, and the stock shot up almost 16 percent. However, the stock is currently trading around $5 per share, a far cry from the $120 per share it reached before the Internet bubble burst. So does the recent upswing signal a potential return to glory, or is the price merely inflated ahead of a possible acquisition by one of the major telecom players?
|
| Daily Chart |
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here
|
| Stock Analysis |
Back in 2000, Level 3 shined as a prime example of investor interest in telecoms that were attempting to provide then high-tech communications services. Since the bubble burst, the company has been in an almost consistent six year decline. The company owns and operates a massive network of fiber optic cable. It also has an enormous amount of debt. So much in fact, that analysts believe the 2002 acquisition of two software reselling companies served only to generate the revenue to satisfy credit agreements, so that Level 3 wouldn't default on its loans. Not to mention the net loss of about $687 million over the past 12 months. So with all these apparent problems, why all of a sudden is Level 3 generating such high investor interest?
|
Bear Sterns explained that “In 2006, we expect price declines to continue to moderate while traffic volumes increase, with the potential to accelerate in 2007 and beyond as the Internet is increasingly used to transport voice, data and video.” If these assumptions are accurate, Level 3 may be sitting pretty on top of their massive network. Throw in the fact that today the company announced their communications services are performing much better than expected, which translates to a potential $50 million increase in the range of 2006 potential profit, and you'll have a good idea of why the stock set a new 52 week high today.
|
So does the recent increase indicate the silver lining to years of dark clouds for Level 3? It's probably too early to tell. A few upgrades and increased investor interest cannot erase the years of debt and losses. Anything could happen, especially in an industry where consolidation seems to be becoming the norm. One thing we can be sure of though, is that Level 3 Communications is definitely a stock to watch in the coming months.
|
Profile |
The Company's principal activities are to provide communication services and information services. The Company is a facilities based provider of integrated communications services including voice, private line, wavelengths, colocation, Internet access, managed modem, data and dark fiber. These services are provided by the communication services segment to the customers located throughout the United States and abroad. The information services segment provides computer outsourcing services, software, licenses and related services through its two operating units, Structure LLC and Software Spectrum Inc. The Coal Mining segment produces and distributes coal using the surface mining method. The operations are carried on in the United States, Europe and Asia. In 2003, the Company acquired Genuity Inc, Telverse Communications Inc and in 2004, the Company acquired ICG's Dial Access Business.
|
|
|
|
|
