Level 3's stock gets nods
Finance expert gives Broomfield company a 'triple-buy' rating
By Matt Branaugh (Contact)
Friday, December 8, 2006
Highly excitable financial television show host Jim Cramer gave a glowing endorsement of Broomfield-based Level 3 Communications Inc.'s stock on Thursday, the same day the fiber-optic network operator's largest shareholder revealed it recently increased its stake.
Cramer called Level 3 "the ultimate speculative growth stock for 2007," during his "Mad Money" program on CNBC, and "the best under-$10 stock I know."
Shares of Level 3 (Nasdaq: LVLT, $5.75) closed up 21 cents, or nearly 3.8 percent. The company employs about 6,000 people, 2,000 of them at its Interlocken business park headquarters.
Prior to a brief interview on the air with Level 3 Chief Executive Officer James Crowe, Cramer outlined the telecom's volatile run, highlighting its $6.8 billion in debt; its lack of a profitable quarter since 2003; its $138 million loss in the most recently completed quarter; and Standard & Poor's CCC- rating — "about the worst rating there is," Cramer noted — on the company's debt.
"It would be hard to paint a more negative picture of Level 3 than I just did with those numbers and statistics. From everything you've heard, this one looks like the mother of all stinkers, a train wreck or a heart attack," he said.
"I still think buy, buy, buy," Cramer said, granting Level 3 shares his "triple buy" rating.
His reasons: Continued growing demand for broadband as voice, data and video transmissions across the Internet continue to explode in popularity. And Level 3 continues to successfully access the bond market to fund acquisitions.
Cramer also gushed about Crowe's leadership, referencing the CEO's former days at MFS Communications Co., where he oversaw a 445 percent return on that company's stock between May 1993 and the end of 1996.
"James Crowe is the real deal, as far as I'm concerned," Cramer said.
In his interview with Cramer, Crowe said video continues to fuel growing demand for broadband, putting Level 3 "in a good spot to benefit."
Crowe said Cramer's projections for 25 percent growth for the company aren't unrealistic. The parts of Level 3 that soon will represent three-fourths of the company's sales are growing 6 percent per quarter; compounding that across a year reaches that 25-percent growth mark, Crowe said.
Crowe's appearance on "Mad Money," came the same day Level 3's biggest shareholder, Southeastern Asset Management Inc., reported an increased equity stake in the company.
Southeastern Asset disclosed ownership of 286.4 million Level 3 shares, or a 22 percent stake, as of Nov. 30, according to a Securities and Exchange Commission filing Thursday. That's up from 180 million shares, or 15 percent, previously. The new total includes 106.4 million common shares underlying convertible bonds that were acquired in 2005, Level 3 said.
Bloomberg News contributed to this report. |
