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Technology Stocks : GST Telecom (GSTX) 4th quarter earning
GSTX 0.01430.0%Nov 28 9:30 AM EST
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To: Rob Preuss who wrote (291)2/8/2000 9:42:00 AM
From: SteveG  Read Replies (2) of 369
 
PW - Hodulik downgrade: GSTX: Downgrading to Neutral from Buy
February 8, 2000
KEY POINTS
* We are downgrading shares of GSTX to Neutral from Buy due to turnover in senior management and its potential effects on
operating results, lack of a long term financing strategy and absence of a near-term catalyst.
* The recent departure of the ex-CEO Joe Basile has left the company without significant leadership. While Tom Malone is a
capable leader, he has been with the company only a short time.
* Basile's departure has also reduced the likelihood that the company will receive private equity financing. While the sale
of GBT shares, the divestiture of the Hawaiian assets and additional capacity sales should enable the company to continue to operate
until 2001, liquidity constraints should continue to hamper the company's operational flexibility.
* We do not believe a near-term catalyst exists that could drive the stock. Outside of a private equity package, additional
efforts to raise capital have not had a major impact on the stock price.
* While the company owns a strategic and valuable West Coast network which is likely to be sold to an acquirer at a higher
price than the stock now trades, we believe the above issues require us to take a more conservative stance on the company's shares.
We are therefore reducing our rating on GST to Neutral with 12-month price target of $10 per share based on our revised DCF
analysis.
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