CenturyLink (CTL -1.4%) is giving back some of yesterday's merger-chatter gains, but Level 3 Communications (NASDAQ:LVLT) is adding on, up another 3.9% today.
Level 3 jumped 10.6% yesterday, and CenturyLink rose 10%, on a report that the two were in advanced talks to merge.
Level 3's at $53.90 today (after closing at $46.92 on Wednesday), and it's looking for at least $60/share in a buyout and $65 "could be reasonable," says Raymond James, which cut CenturyLink to Market Perform from Outperform -- thinking that stock could trade sideways for the months it could take to close such a deal.
UBS sees the deal cresting $1B in synergies, given the companies' overlapping infrastructure. Analyst Batya Levi is assuming an all-stock deal at 9-11 times EBITDA and has CenturyLink at a Buy with a $36 price target (implying 18% upside).
Oppenheimer's Timothy Horan, meanwhile, sees more of a 50/50 cash/stock split at a $60 valuation for LVLT. He's got CTL at Market Perform but boosts LVLT to Outperform at that $60 target.
Among peers (and other potential targets) today: CCOI -1.2%, INXN +2%, GTT flat, ZAYO +1.9%, AKAM +0.9%, FTR -2.4%.
Virtual network operator GTT Communications (GTT -0.7%) is on track to hit a $1B revenue goal in the next five years, according to CEO Rick Calder.
“We did give an outside time frame of within five years and we hope to achieve it by then or earlier," he says.
The company beat revenue expectations in Q2 with $128.9M in revenue. At the time, Calder said objectives were on track including a goal of $250M in adjusted EBITDA.
The company will focus on enhancing its entire portfolio of services to get there, including Ethernet, MPLS, VPLS, dedicated Internet access and broadband and security, but managed voice services (which the company entered through an acquisition of One Source Networks) is a key because of big upside, Calder says: “Adding SIP trunking and hosted PBX onto our portfolio gave us considerable scope and scale and we see growth opportunity there because it represents only 4-5% of our revenue today.”
Analysts expect the company to log $132.5M this quarter (up from a year-ago $97M), with an EPS of $0.08 (vs. the prior year's $0.05).
GTT Communications (NYSE:GTT) is up 13.1% following a Q4 earnings report where it edged revenue expectations on acquisition-driven revenues that grew 83%.
Net income of $27.6M was driven by an income tax benefit of $34M, tied to the release of its valuation allowance against deferred tax assets (management figures it's likely that the company can use NOL carry-forwards in the future).
EBITDA more than doubled to $25.5M, beating an expected $24.3M.
Gains in revenue, gross profit, EBITDA and free cash flow were driven by acquisitions of MegaPath's managed services business as well as of One Source Networks, along with organic growth.
Equinix (EQIX +1.6%) should post revenue and EBITDA ahead of Street estimates amid "y/y growth in MRR ... and a secular shift to the cloud," according to Pacific Crest's Michael Bowen and Trevor Upton. It's one of five stocks that Pacific Crest mentioned buying into upcoming earnings in its Q1 Communications Services Preview.
The stocks all get an Outperform rating from the analysts. Equinix received a $255 price target and the firm "would remind investors that our bull case on shares remains $280." Shares closed today at $239.80 and the firm reports April 29.
Rackspace (RAX +0.9%) also benefits from shifting business, the firm says: "We believe we are in the early stages of a secular shift from on-premise data centers to hybrid clouds made up of private and public cloud platforms. We believe the company is executing more efficiently and improving its managed service value proposition." Their price target is $58; shares closed today at $52.53 and the company reports May 11.
SBA Communications (SBAC +1.8%) got a price target of $138 on expectations of strong leasing activity and hearing about positive impact from the FCC's last spectrum auction; it closed today at $121.84 and reports on Friday.
Cogent Communications (CCOI +1%) received a price target of $45 and closed today at $34.24; it reports May 7. GTT Communications (GTT +1.6%) got a $24 target and closed today at $18.31; it reports May 7 as well.