Kaufman Bros Report
PSINET, INC.
RATING: STRONG BUY
PRICE TARGET: $84
FINANCIAL GUIDANCE AT LAST
PSIX has issued financial guidance for 2001. We believe investors may be jittery about the company™s $600 million funding gap, which will likely need to be addressed during the next several months. It is important to note that PSIX has $1 billion in its venture portfolio and a consumer
ISP, Inter.net, which we think could fetch $300-500 million during 1H01 if sold to another entity.
We believe the venture arm and a potential sale of Inter.net could meet this funding gap, meaning PSIX may not have to go to outside sources for capital. Further, with an improving financial condition (i.e., EBITDA improving to $250 million next-year), we believe the company will be able to expand current credit and vendor lines to support growth.
We note that PSIX™s guidance for roughly $500 million in high-end hosting solutions revenues in 2001, in our view, justifies today™s stock price Œ we continue to believe investors are not paying for the company™s solutions, access, bandwidth, transaction processing, venture and consumer units. Given the depressed valuation of the company (e.g., enterprise value/2001E revenue multiple of 2.5x), we maintain our STRONG BUY recommendation.
Vik Grover, CFA
Communications Services |
