Level 3's Share Price Is Headed Higher

Level 3 Communications (LVLT) just had its annual meeting this week and it went very well.

Chief executive Jim Crowe, said the company's financial performance is on track to improve with increased cash flow and lower debt ratios.

Crowe, responding to shareholder questions, acknowledged that "we shot ourselves in the foot" with difficulties integrating six companies that Level 3 acquired over the past three years.

"In spite of the problems, we're here with a set of (fiber-optic network) assets that are as fine as any in the industry," he said, adding that demand for bandwidth provided by Level 3 "will continue to grow at a dramatic rate."

On Tuesday, May 20 LVLT share price gained about 15% to $1.21 at market close. LVLT share price action could follow RF Micro Devices (RFMD) which had the exact same chart pattern two months ago and traded from the $1.20 range to its current position in the mid $2 range.

Considering the bullish talk from the CEO, I now believe that LVLT is on the road to profits, and the value meter says to me that LVLT is undervalued traded at less than half its revenue of $2.63 a share. I'm a buyer before the train leaves the station.

Chart technicals point to more upside reward than down side risk.

Disclosure Long LVLT. $1.10 stop loss on half my position.

Comments

[China Expert:]

Jeremy !

I suggest you take a basic course in Cash flow analysis. If you keep buying stocks based upon multiples of revenues, your going to loose your shirt ! There's a reason why LVLT bonds yield between 15-25%.

May 21 09:38 AM

[Nettligent:]

LVLT management has done a super job to clean up and improve its balance sheet, revenue, and sustain profits. Accumulate position.
Netgear (NTGR) and Symmetricom (SYMM) are the worst culprit. Short.

May 21 10:52 AM