Hi space cadet:
First of all, you need to realize that telecom companies
should be evaluated differently from semiconductor and
computer companies. Because the telecom field is capital
intensive and infrastructure dependent, new telecom
companies, such as Winstar, Teligent, Qwest, or even
Loral typically lose money during the infrastructure
buildout phase. Their valuations are based on the
time-discounted value of all their future earnings.
In other words, if everything goes well, they lose
a lot of money for several years, and then make a
lot more when their infrastructure is in place.
The key difference between good and bad telecom companies
is execution, which means: a) efficiency in building
out their infrastructure both quickly and cheaply, and
b) effectiveness in signing up new customers (this last
element is very important).
Concerning CVUs, WCII and TGNT, here are my views (I
expect some of the regular posters will not completely agree):
CVUS: The uncertainty here is that all CVUS investors are
way ahead of the crowd (may be even too far ahead). It
has started building out its infrastructure, but
2-way LMDS equipment has become available only
recently. Right now CVUS needs the capital needed to
build out its infrastructure, and it needs to execute
much better in terms of signing up new customers for
its Internet access services in Manhattan. We are all
debating whether the current price is close to the
bottom. I think it is, but others on the Yahoo thread
may disagree. My advice would be to wait and buy on the
open immediately after an announcement of Fleet's
loan (or a loan from another financial institution)
to CVUS. When this event occurs, I expect CVUS will
go up and will never look back.
WCII: It may be slightly overbought, so that it could
retreat to the low 30's. However, it is not a short
based on fundamentals. Because it is a prime acquisition
target, shorts could have their heads handed to them
in an instant. If WCII is not bought out, its stock
price could well exceed $100 a few years from now
(I prefer not to speculate on the timing).
TGNT: Its valuation is excessive for its stage of development.
I expect that some pessimism will creep in at some point.
Also, it got its licenses under very shady circumstances.
If some Congressional hearings were to be announced on
this issue, it might be worth shorting it. However, be
careful because TGNT is also a possible acquisition target.
Finally, let me add LOR to your stock horizon. It
purely a long term buy and hold play (it may be slightly
overbought now). It is the closest thing to a sure bet
in the telecom sector, but holders will need to wait
about 4 or 5 years to see really high valuations
(above $100). The quality of information available on SI
on this stock is exceptional.
Best regards,
Bernard Levy |
