Level 3 Communications Is at an Attractive Stock Price

LVLT traded at a high of $3.53 a share on 9/19/2008 a day after Janco Partners analyst resumed Accumulate rating with a $4 Target. LVLT stock price has had a huge selloff, down now at $1.28 a share. I believe LVLT now looks really good for a trade. Buying LVLT under $1.35 offers very low risk with good upside reward. LVLT has earnings this week on Thursday after close. LVLT could very well rally back around $2 a share.

On 7/24/2008, LVLT issued FY 2008 net income guidance above analysts' estimates and reaffirmed FY 2008 EBITDA guidance.

LVLT announced that for fiscal 2008 it expects net earnings in the range of $(550)-$(350) million and consolidated adjusted EBITDA in the range of $950-$1,100 million. According to Reuters Estimates, analysts are expecting the company to report net income of $(611) million for fiscal 2008.

Summary from LVLT last investors presentation:

• Expects to be free cash flow break even in aggregate for rest of 2008;
• Expects to be free cash flow positive for full year 2009;
• Core 2008 revenue growth expected 8% to 13%;
• Debt maturity schedule no issue until 2010 or beyond;
• Debt/EBITDA expected to be 6.6X for 2008, down significantly from last three years.

LVLT 50 Day moving average is $2.54 a share. Institutions mostly trade LVLT.

Disclosure: Going to start a long position.

Comments

[NGA:]

Richard, the company has 6.5x debt leverage. most telecom companies, including the best ones in the world, trade at that valuation - at the high end.

LVLT is not best in class. they dont generate free cash flow and i hate to see retail investors chasing a stock that is worth basically nothing. look at CHTR (a better business model) for a reference point on where LVLT should be trading. the stock is worth $0.50 a share, simply based on option value.

2008 Oct 22 01:21 PM

[Stone Fox C...:]

Agree NGA. Just watched MICC get killed and they have profits and limited debt while LVLT keeps losing money and has a ton of debts. They better make those projections or they'll be toast tomorrow.

2008 Oct 22 02:09 PM

[NGA:]

doesnt look too good. too much debt and really bad economic environment = big trouble. management has no credibility. its now a debt restructuring story. how exciting.

2008 Oct 23 11:31 AM