Small firm yet well respected analyst Colby Synesael
followed closely by several funds, rates DVW a BUY and says "we
believe the stock is worth closer to $3.45".
"Going forward we believe the strong results (1Q06) are sustainable,
both in terms of increasing demand as well as margin".
"We believe shares are undervalued based on our relatively
conservative growth assumptions... we believe CLEC space in general is
undervalued".
"We believe DVW is benefitting from its unique position as a national
facilties-based carrier. Recent consolidation, as well as the removal
of UNE-P, has increased the value of COVAD assets. With more than 2,000
colocation sites across the country, COVAD has the opportunity to be a
one-stop shop for wholesale carriers...exemplified via its partnership
with ELNK, its relationship with Verizon, which is transitioning
customers from Rhythms outside its local markets to COVAD, and Birch
Telecom, which should transition 2,000 of its business customers over
the next 2-4 months. Going forward, we believe more wholesale
customers will utilize COVAD, while COVAD will focus its own sales
force on the SME space as it ramps its VoIP service and partnership
with ELNK."
2006 Revenue Estimates $483.4 million; EBITDA $19.7 million
2007 $551.1 million; EBITDA $56.7 million
All numbers exclude LPV revenues from ELNK partnership
because we do not know the timing of the rollout though believe
it will be material once it begins to ramp.
ELNK expects to ramp 18-20 million homes passed by year-end 2007.
We estimate that COVAD gets approximately $30/month per line and 50%
gross margin. Assuming 3% penetration on 18 million lines, or 540,000
useers, this could be a $195 million business exiting 2007." |
