Ken,
You are right and wrong! Right because debenture prices for NXTL have gone down but wrong because this is NOT a NXTL-specific event. Credit spreads (the difference in the bond coupon and the underlying Government bonds) have soared across the board, affecting corporations such as IBM to NXTL and others. So, you CANNOT draw any implication from NXTL debentures in isolation.
Ed mentioned market correction. He is right. We are going through a massive market correction which is not fully reflected in the indices. The risk in the system has simply gone up substantially and the increase in credit spreads is one way of observing this.
The only specific (negative) event you can attach to NXTL is its expansion internationally. There is no question in my mind that these plans are being severely affected (Brazil, Argentina, Mexico etc.), either because of the potential demand or (and most importantly) the availability of financing for such projects, which will affect the rollouts.
Domestically, the story is intact. NXTL is and will be one of the 2/3 nationwide coverage providers, and they are just beginning to realize the potential of the infrastructure that they have already put (and will continue to be putting) in place. Any potential slowdown maybe be beneficial for them, because it may provide them the breathing space they need to catch up with the demand they are seeing for the system (with all the associated service quality issues). For example, I hear that in New York, they continue to experience problems with system availability etc because of excess demand (by now, I was expecting that they would have addressed them, by they have not)
So, relax, and buy at these levels if you have the guts. Panics, such as the one we are going through right now, provide great (and rare) buying opportunities. Unless you believe that the world will collapse and stays there for some time (a 1929-type scenario), you will not see the stock down to the $15-type levels that Ed is waiting for. But even the 1929 market allowed the (remaining few, I will admit) investors to buy at unbelievable levels.
Therefore, I am putting my money where my money is and have been nibling (either through outright purchases, or combinations of long-term puts and calls). And I am keeping a bit of dry powder - just in case!
My 5 cents.
Ever-optimistic Tavros |
