Thursday, January 18, 2007

Why I like Level 3 Communications (LVLT)

I'm a bull on Level 3 (LVLT) because of the underlying intrinsic value of their broadband infrastructure. The stock got rocked the last couple of days along with the whole technology sector. I think this is a critical tipping point. Sink or swim scenario for some of tech. Back to LVLT. I ignored Cramer the first couple of times he went over Level 3 . Then I did the research. They OWN the network. Well, not all of it, and we're talking about broadband, not that VZ network. As the demands increase companies like Level 3 and Akamai (AKAM) will be well positioned.

Well what if something happens, like competition, you ask? In terms of Akamai, that is a very real scenario. To catch up to Level 3 companies will have to build, or buy and neither of those happens overnight. In terms of buying, that's what Level 3 does, buys everyone, it's called slash and burn like Sherman's march to the sea!

Now lets talk about profit. They've got NONE. With a young company that is to be expected, so you have to judge them by sales. Judging by the ratios, it's not bad.

What about the debt, they got BILLIONS of it. They are paying it down quickly, trading in for better rates, and trading it down. Level three has been trading down their bond debt with stock. Doesn't this dilute the shares? Yes, but it puts value back in the company, which is what I as a shareholder want to see. To top it all off, think of it like this; The BOND GUYS are asking for stock! Here, take our guaranteed profit, WE WANT SWEET SPECULATIVE STOCK.

It's on sale right now, but I'm in a holding pattern. If it bounces off the 50 day average I'm in. If it slides below $5.70ish, it will most likely keep on going.


Post a Comment

Subscribe to Post Comments [Atom]

<< Home