EarthLink: How A Supposed Dial-Up Company Could Have 80-250% Upside
- We believe that EarthLink could be worth $6/share, potentially nearly double its current share price, based on fundamental cash flow analysis alone.
- In a value recognition scenario, which we view as potentially likely, we believe EarthLink might be worth $8/share.
- Downside case of $3 based on valuation in line with the assumption that growth rates on its key legacy businesses materially worsen with no valuation credit for its sizeable NOL.
- The risk/reward is uniquely asymmetric with potential downside of 10% relative to potential 80-250% upside.
- Upcoming catalysts over the next 6 months include quarterly earnings (potential guidance revisions upward) and potential value enhancement via a potential sale of all or parts of the company.