RESEARCH ALERT-Citizens Comm. started as a buy
NEW YORK, June 19 (Reuters) - J.P. Morgan said on Tuesday it initiated coverage of Citizens Communications Co. (NYSE:CZN - news) with a buy rating and a $20 price target.
J.P. Morgan said it expects Citizens will produce ''relatively strong'' growth in revenues over the next few years. Citizens should be able to achieve strong growth in core revenue by growing both access lines and revenue per line at rates well above industry averages. J.P. Morgan expects the company to post steady access line growth of 3 percent to 4 percent, or roughly two times greater than that produced by the Baby Bells.
J.P. Morgan said it believes the company will improve margins in its local exchange business to 57 percent in 2005, from 49 percent in 2000. Citizens also plans, through acquisitions, to more than double the number of access lines served to 3.1 million.
J.P. Morgan said it expects Citizen's total 2001 revenue will reach $3.03 billion, up from $1.80 billion in 2000. In 2002, it projects total revenue of $3.96 billion.
``Citizens is operating in a near-monopoly environment. In our view, Citizens's market is one of the most attractive opportunities in the communications industry,'' the J.P. Morgan said in a research report.
Citizens provides local telephone services in rural markets throughout the United States. ``These markets are characterized by high revenue per line, high cash flow margins, and a stable regulatory climate. Unlike the Bells, Citizens is not restricted from offering certain services...and the high cost of building a rural telephone network due to low customer density should protect Citizens from competition,'' J.P. Morgan said. |
