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To: P.M.Freedman who wrote (4727)	7/1/1999 5:10:00 PM
From: VFD	Respond to of 11568

Industry Analysis Jul 01, 1999 Telecom: MCI Worldcom: Why Wall Street Got it Wrong by Chris Bulkey 7/1/99 Talk about an over-reaction. Shares of MCI WorldCom (NASDAQ:WCOM - news) fell $7.56, or 8%, to $86.13 on Wednesday amid concerns that the No. 2 long-distance phone company will see slower revenue growth from traditional voice calls. Then Paine Webber analyst Eric Strumingher said that he expects second quarter revenue, excluding data and Internet services sales, to increase by 6% in the second quarter compared to 7% in the first quarter and 8.5% last year. Granted, prices on traditional voice calls have been under pressure, which was highlighted when No. 5 long-distance carrier Frontier Corp (NYSE:FRO - news) announced that it will not meet second quarter and full year 1999 earnings estimates because of declining prices on voice calls. However, while MCI Worldcom generates about 60% of total revenue from voice calls, this is not the key area for growth for the company. Nearly two-thirds of its sales growth is coming from international, data and Internet related sales, areas which Warburg Dillon Read analyst Linda Metzler forecasts to grow by 40% year over year. This is exactly the sentiment we echoed in an April 12th Stock of the Day recommendation click here for story. We noted that the company was building an impressive portfolio of domestic and international broadband assets that fit well with MCI Worldcom's strong brand name recognition. In fact, even after Wednesday's announcement, MCI Worldcom is still likely to meet the $0.44 per share First Call consensus estimate for the second quarter when earnings are announced on July 29. What we're seeing on Thursday in reaction to the prior day's news is that analysts are trimming their overall revenue growth estimates from the 17-18% range to around 16%. Big deal! This is a $165 billion company. Generating mid double-digit revenue growth is rather impressive, especially considering that its data and Internet businesses are still in nascent stages. A quick look at MCI Worldcom's growth rates supports the positive sentiment being echoed throughout the analytic community. The company earned $0.68 per share in 1998, and is forecasted to earn $1.97 this year and $2.84 in 2000. That equates to a three-year compounded annual growth rate of 104%. Not too shabby, huh? Add to that high growth rate a premium multiple that is afforded by the company's recognized brand name and growing international and broadband presence, and you have an ideal core equity holding. Although near-term momentum could be tempered somewhat by the lack of a significant upside surprise due to slowing voice related sales, the company's long-term prospects remain rock solid. That said, at midday Thursday, the shares have rebounded somewhat, rising $2.31 to $88.38. Bottom Line: We urge investors to use Wednesday's sell-off to take a position in this dominant telecommunications company. We continue to believe that the shares will trade up to $120 per share over the next 12-18 months.