Analyst says IDTC 4th Q on track and inline with expectations.
Note, I am certain they wouldn't be saying this without guidance from the company. Even Jeffries thinks they will beat the q. This should relieve any spookiness over the strx recent warning.
FIRST CALL RESEARCH NETWORK
11:01am EST 12-Aug-99 Scott & Stringfellow (Thomas C. Morabito 804-782-2006)
IDTC - Joint Venture with Telefonica; 4Q99 Should Be in Line
August 12, 1999
Thomas Morabito (804)
782-2006
John L. Snow III (804)
782-8749
IDT Corporation - IDTC - $15 3/8
IDTC - Joint Venture with Telefonica; 4Q99 Should Be in Line
52 Week Range: $35 - $9 Market Cap: $550
MM
Current Yield: N/A Common Shares: 35.7
MM
Est 3 Yr Rev. Growth: 35% Avg Daily Volume:
1,300,000
12-18 Month Target: $26 Debt / Capital: $118 MM /
46%
Current Opinion: Long-Term Buy (2) Previous Opinion: Long-Term Buy
(2)
EBITDA/Share (FYE: Jul.) 1998 A 1999 E 2000 E
Q1 - Oct $0.16 $0.42 A 0.39
Q2 - Jan 0.21 0.29 A 0.43
Q3 - Apr 0.22 0.32 A 0.48
Q4 - Jul 0.48 0.36 0.55
Year* $1.14 $1.41 $1.84
Previous $1.14 $1.44 $2.05
Revenues (MM) $335 $693
$937
TEV/Revenues 1.7x 0.8x 0.6x
EPS $(0.22) $0.33 $0.44
* Quarters may not add due to rounding and intra-year changes in shares
outstanding
Key Points
_ IDT and Spanish powerhouse Telefonica (TEF-NYSE) announce joint
venture
targeting the Hispanic population in the U.S.
_ As part of the agreement IDT takes an equity stake in the SAM-1 cable
and
agrees to purchase capacity over the next five years.
_ We expect fiscal 4Q99 results for IDT to be in line with expectations.
_ We are maintaining our Long-term Buy (2) rating on IDT.
Additional Discussion
IDT and Telefonica announce wide-ranging pact. Early this morning IDT and Telefonica SA announced the formation of a joint venture which will target the rapidly growing Hispanic population in the U.S.
We believe that products and services initially offered will include prepaid calling cards, Internet services, and possibly wireless services. We further believe that this is positive news for IDT in that joining forces with probably the strongest carrier in the Spanish-speaking world is a complement to the Company and greatly enhances its growth prospects.
Agreement also involves IDT stake in SAM-1 and purchases on the undersea cable. As part of the pact, IDT will also become a stakeholder in the SAM-1cable, along with Telefonica and Tyco. This cable will be completed in several stages over the next two years and will connect a multitude of countries in Central and South America. Finally, IDT also agreed to purchase at least $100 million in capacity on the system over the next five years.
A key point here is that by being a signatory owner, IDT (with Telefonica) is able to gain significant savings in transmission costs.
We expect fiscal 4Q99 results for IDT to be in line with expectations. OnJuly 31,1999 IDT completed its fiscal year and should be reporting results in the next few weeks. We believe that our revenue estimate of $207 million and EPS outlook of $0.07 will be in line with what the Company reports. We are especially optimistic about the top line as IDT has a long track record of beating analysts' revenue estimates.
We are maintaining our Long-Term Buy (2) rating on IDT. While we believe that IDT is an exciting story and the Telefonica agreement should add to future growth, we are leaving IDT at a Long-Term Buy (2) for the time being. This is due largely to timing issues associated with the Telefonica agreement, i.e. when will we see significant revenue generation, and macro events out of the control of the Company. The communications sector (and tech stocks in
general) has been especially choppy recently due to interest rate concerns, pricing issues, and other factors. As a result, in the near-term while IDT is performing well, these market and sector concerns may take precedent over positive news coming from the Company.
Company Description
Based in Hackensack, New Jersey, IDT Corporation is a rapidly growing,
facilities-based international long distance (ILD) carrier. The Company
offers
a broad range of services which include retail long distance largely in the
form of calling cards, wholesale transmission for other carriers, Internet
telephony through its recently spun off Net2Phone unit, and Internet access.
IDT plans to capitalize on the increasing demand for international
telecommunications services and the worldwide trend toward deregulation in
the
industry. |
