from Pacific Crest top picks for 2000 dtd 1/5/00
Covad (COVD - $59 1/8) Rating: Strong Buy
During 1999, DSL-pioneer Covad Communications was able to leap-frog the
cable ISP leader Excite@Home during 1999 to boast the largest broadband
access footprint in the United States that reaches an estimated 34 million
marketable homes and businesses. We believe Covad will meet the next
challenge of accumulating a critical mass of Covad DSL subscribers in 2000
given over 350 ISPs resell Covad DSL, its highly automated back office and
the favorable line sharing ruling that will be implemented by June. We believe
2000 will be the year DSL evolves from a high-speed Internet access
(data-only) product to a content-rich digital conduit that can simultaneously
support a host of applications including voice services, e-mail, broadband
Internet access, caller ID, call waiting, streaming media, e-learning and
video-on-demand, among others. We consider DSL the ultimate Internet
enabling tool and believe the race to digitize over 170 million analog
telephone lines to DSL (digital subscriber line) has just begin with less then
2% penetration today. With the largest DSL access network in nation that will
reach 50% of all homes and businesses by year-end, we consider Covad the
best play on broadband access and a top pick for 2000. Over the next four
years, we expect revenues will mushroom from $60M to over $1.2B by 2003
driven by a growing base of ISPs resellers and strong partnerships with
AT&T, UUNET, Mindspring, PSINET, Concentric Networks, GTE, Real
Networks, Yahoo and Micron Electronics, among others. |
