Dont think this has been posted here. It doesnt get any stronger worded than this.
\http://www.ragingbull.com/mboard/boards.cgi?board=ATHM&read=39928
From the yahoo bd. Prudential defends Athm...
We see the recent decline of ATHM shares as unprecedented, a huge over-reaction
and an exceptional buying opportunity. We believe ATHM shares are
significantly undervalued and a compelling investment at current levels.
ú The battle is not over open access nor about DSL vs. Cable as technologies.
Instead, investors should, we believe, view ATHM as a content and services
supplier to the cable companies (MSOs) who are at war with the telephone
companies for control of the customer relationship.
ú ATHM shares are likely to see continued pressure until the Portland ruling
is released. We expect this over the next 60 or so days at which time we
expect significant short position covering.
ú Exclusivity remains a controversial topic, we have great reason to expect
ATHM?s position within the cable infrastructure will be further
strengthened as MSOs renew and extend relationships with ATHM including the
potential use of DSL as an augmenting broadband delivery vehicle.
ú We believe the battle today is about bandwidth. This is not a choice of
cable vs. DSL and we note that the relationships between carriers, content
providers, commerce enablers and competitors will be complex and complicated. Investors should expect ?coopertition? between these parties
which we think could further confuse Wall Street on a short term basis.
ú MSO?s have spent a small mint creating, supporting, and developing the
@Home name. We do not think that they will be so quick to adopt a new
brand, brand identity and service headaches in the wake of exclusivity
expiration.
Summary:
We see the recent weakness of ATHM shares as (a) unprecedented; (b) a huge
over-reaction; and (c) an exceptional buying opportunity. Given the
increasing competitive pressure between MSO?s and telephone carriers for
account control and the enormous time, knowledge and capital commitments
requisite for the MSO?s to offer ATHM-like services independently, we are not
concerned about the end of exclusivity or ATHM?s ability to meet our current,
or forward expectations for members, revenues or profits.
We remind investors that exclusivity runs through the middle of 2002 at a
minimum and will abate over approximately a four year period with all parties
released of exclusivity obligations by the end of 2006. Short-term, we note
that system operators, such as AT&T, have committed to complete their
infrastructure upgrades by the end-of-year 2000 or early 2001. Under the
current agreements, this means that the only product / service that can be
offered is that offered by @Home. We further note that a full-scale branding
and promotional effort are underway in many regions in which the local MSO has
adopted the @Home moniker as part of their own service names (e.g.
Comcast@Home, ATT@Home, etc.) We find it highly unlikely that the MSOs will
disregard these programs and branding efforts once exclusivity ends ? further
suggesting that the ATHM relationships are, in fact, much stronger and more
likely to be renewed going forward.
Near term, we believe ATHM shares are being held under the black cloud of the
Portland decision. Paraphrasing Prudential Securities? Washington Research
Office?s Susan Lynner ? there is no clock set on the U.S. judiciary. We will
have to wait and see. A great deal of pressure is at hand. AOL, AT&T, the
Federal Communications Commission (FCC) and ATHM all stand on the same side of
this argument. The political and economic ramifications of the decision are
significant, and we look forward to a positive outcome ? one in which
mandatory open access can not be imposed by a local, municipal or state-based
regulatory body. We will have to wait and see.
In the interim, we point investors to three items: (1) Portland, though
important, is a bit of a side show, in our opinion. We feel that the real
battle lines lie between the MSO?s and the telco?s; (2) To this end, we see
ATHM as a supplier and critical ally of the MSO?s in the battle for the
customer; (3) ATHM has the ability to capture DSL services as part of a
branded broadband service offering within the MSO?s operating regions ?
offering the MSO the best of all possible worlds (and a stronger defensive
position against the onslaught of DSL service offerings); and (4) that
broadband demand is only now reaching mass market, enjoying strong organic
growth, viral spreading patterns and increasingly lower customer acquisition
costs.
Given the recent weakness, we think current ATHM pricing is exceptionally
compelling and represents a ?table pounding buying opportunity.? We are
reiterating our ?strong buy? rating and $125 price target based on a
discounted cash flow (DCF) analysis. |
