some CLEC previews from DBAB:
WinStar: Nasdaq-CII-$39.06-STRONG BUY
52-Week Range: $64-$10
12-Month price objective: $69/share (based on our DCF, 10x-terminating
multiple, 20% equity discount rate)
Equity market capitalization: $3.6 billion
Comments: WinStar fell by more than 20% in the final week of 3Q99 after the
company released its first iteration of year-2000 guidance, which was
significantly below Street consensus on the top line, clouding what was
otherwise a strong quarter for the company strategically and operationally.
None of the events that transpired last week change the fundamental outlook
in any way, we believe, and we look forward to the continued expansion of
the data story at WinStar. In September, the company offered the first
glimpse of its new equipment testing facility in Washington, D.C., and gave
analysts a hint of the new services and equipment that could hit the WinStar
network soon. Among other products that caught our attention, high-speed
point-to-multipoint radios (180 Mbps-like) could soon allow WinStar to
provision service at an expense of less than $100 per T-1 connection, and
wireless LAN technology is being explored to drive demand for broadband
last-mile connections among the estimated 80% of small businesses
without a LAN.
Teligent: Nasdaq-TGNT-$49.69-STRONG BUY
52-Week Range: $76-$19
12-Month price objective: $64/share (based on our DCF, 10x-terminating
multiple, 20% equity discount rate)
Equity market capitalization: $3.4 billion
Comments: Teligent turned the corner last quarter, the first quarter in which
real meaning can be derived from some of the operating metrics for the
company. The key takeaway was the continued deployment of network into
which to sell the Teligent service suite. After announcing a shared-bandwidth
data offering targeting the small business segment craving low-cost "medium
speed" access, Teligent announced the development of its own "IP platform"
to bring ISP services in house and reap the incremental margin of facilities-based
services. Management cited four reasons for getting into the facilities-based
ISP game, including cost savings (up to $100 million over five years),
tighter network control, synergies between the voice and data networks, and
the flexibility as a facilities-based backbone provider to roll out new services.
We believe the announcement underscores the future direction and real
value-added area of the fixed-wireless game: flexible, economic data
connectivity.
Advanced Radio Telecom: Nasdaq-$12.63-STRONG BUY
52-Week Range: $17-$2
12-Month price objective: $21/share (based on our 10-year DCF,
10x-terminating multiple, 20% equity discount rate)
Equity market capitalization: $0.8 billion
Comments: ART closed on its $251 million strategic investment, led by
Qwest Communications, following a successful shareholder vote on
September 8. Also in September, ART launched its fourth commercial
market, San Jose, after showcasing the new 100MB consecutive point-to-point
(ring) network architecture from Triton Systems. Our one piece of
contention so far is that we believe management could be more vocal in
support of its story. We do expect to hear from management regarding
specific growth expectations soon. We also believe that further financing in
the form of a vendor credit facility may be in the works (the most obvious
candidate would be Cisco, which is providing much of the network
infrastructure), which could be holding up management's guidance.
Nevertheless, we expect ART will progress from a regional player to a
nationwide ISP in 2000.
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