Springtime at Level 3!?

June 6th, 2008 by · 2 Comments

It's not often lately that Level 3 shareholders get to celebrate, but as Spring draws to a close this month it is becoming increasingly clear that springtime is just getting started at Level 3.  Just 7.5 weeks ago on April 15, LVLT was trading at $1.96, today it hit $4.48. The last time we saw this price was October 15, 2007 - just days prior to the October Massacre.

What's changed is apparently the fundamentals, or at least the street's current view of those fundamentals.  Ebitda guidance for the year now looks more reasonable, cost savings seem to be kicking in.  Are sales recovering too?  Heck if I know, but they say the market looks ahead 6 months, and I suppose the market is predicting sales will in fact kick in.  What little I'm hearing nowadays out of Broomfield does suggest that order is condensing out of the chaos, perhaps more order than they have ever had, actually.  Of all the competitive backbones out there, LVLT has always had the asset base that really ought to win.  If, if, if they finally get their act together on operations, it will be quite something to watch.

I've said a few times that LVLT is not ready for another big M&A, and that has two parts:  a) the desperate need to integrate what they already have, and b) lack of currency with which to make the purchase.  There is still work to do on the former, but the latter concern may be fading.  Raising outside money may still be expensive, but with a stock price approaching $5, one has to say that it is increasingly reasonable for them to use it as currency given the current valuations of others such as XO or GLBC which have always been the obvious targets.  If LVLT's actual fundamentals in the July earnings report really do show the operational improvement that the stock price is forecasting, I may have to lift my personal moratorium on wild LVLT M&A speculation.

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Categories: Internet Backbones · Mergers and Acquisitions

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2 Comments So Far


  • lovelvlt says:

    As always, thank you for your tremendous contributions to the message board and now your blog. I appreciate all posters who so generously share their expertise and make the LVLT board unique.

  • Alfred J. Beljan says:

    fundamentals do not appear to be the only apparent change – the atmosphere about LVLT, from the top down, has seemingly improved due perhaps to the departure of the COO, Kevin O’Hara.

    acquisitions of companies such as XO and GLBC will become much easier in 2HO8 when the LVLT share price nears $6 and the $175 million hedge from Merrill Lynch is available for cash.

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