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Technology Stocks : (LVLT) - Level 3 Communications -- Ignore unavailable to you. Want to Upgrade?

To: SecularBull who wrote (2868)	6/18/2001 11:48:22 PM
From: IndioBlues	Read Replies (1) \| Respond to of 3873

Kaufman Bros. Research Note ..out this morning had comments re LVLT. They make a decent case for "staying the course" and maintina strong buy w/ $32 target. I'm too long to get out now. I sure hope Crowe knows what he's doing. LEVEL 3 COMMUNICATIONS, INC. (LVLT $6.70, Intraday) Vik Grover, CFA, 212.292.8123 Rating: STRONG BUY vgrover@kbro.com Price Target: $32 Osman Parvez, Associate Fiscal Year-End: December 31 2000A 2001E 2002E Diluted Shares: 378.0MM EPS (New) Under Review Under Review Under Review Market Cap: $2.5BN EPS (Old) ($4.01) ($6.90) ($6.15) Long-Term Debt: $7.9BN P/E NM NM NM 52-Week Range: $95 - $6 GAAP Rev (New) Under Review Under Review Under Review Avg. Daily Volume: 8.74MM GAAP Rev (Old) $1.19BN $1.67BN $2.64BN RIGHTSIZES BUSINESS PLAN TO WEATHER THE PERFECT STORM; WE CONTINUE TO LOOK FOR 2H01 GDP RECOVERY TO DRIVE DISCRETIONARY SPENDING ON BANDWIDTH AND RIGHT THE ENTIRE SECTOR • LVLT reigned in expenses to save $2.3 billion through 2003. The company cut cash revenue guidance for 2001-2003, cut 2001 EBITDA guidance, affirmed 2002 cash EBITDA and GAAP EBITDA guidance, and instated strong 2003 guidance for cash and GAAP EBITDA. We had expected this maneuver could happen for some time, alluded to it last week, and believe it is highly positive in that it brings numbers down to a reasonable level and shores up LVLT’s funding situation. • Specifically, due to the telecom implosion, 2001 cash revenues from telecommunications services are forecast to hit only $1.3 billion, down roughly 15% from prior guidance. 2001 cash EBITDA was cut to $600 million from $700 million, leading to 2001 GAAP EBITDA of ($420 million) from ($330 million). • Though 2002 cash revenue estimates were cut to $2.5-2.6 billion from $3.1-3.3 billion, adjusted EBITDA was affirmed at $1.0-1.1 billion. Further, 2003 cash revenue guidance was instated at $3.5-3.6 billion, with cash EBITDA during that period of $1.6-1.7 billion and GAAP EBITDA during that period of $850-950 million. Our current EBITDA estimates for 2002/2003 are in line/below with this guidance. THE MORNING EXCHANGE PART II JUNE 18, 2001 Call the KBRO Trading Desk at 1.800.807.8723 The Morning Exchange – Part II 2 • Therefore, we think LVLT has affirmed 2002 cash flow and instated strong 2003 guidance that is likely a reflection of the company’s shift into direct sales to multinational corporations, a focus on sales of wavelengths and short-term leases rather than IRUs and dark fiber sales, and a substantial reduction in force approaching 20%. • While affirming a positive 2002/2003 outlook, we believe LVLT shares will remain in the penalty box as investors search for the best measure of success for the company. We continue to believe spending on bandwidth is discretionary on the part of enterprises but mission-critical for integrated telcos, emerging service providers, and next-gen infrastructure companies (e.g., ASPs, MSPs, XSPs). • We anticipate that the declining interest rate environment will reignite enterprise spending this fall, several months after the first cut, at which time the paradigm shifts of voice migrating from TDM network to IP; of desktop and LAN-based applications migrating out to the Internet; and network disaggregation by fiber providers like LVLT will dominate current negative Street sentiment. • We will adjust our earnings model after listening to LVLT’s conference call scheduled for today after the close. In the meantime, as contrarians, we believe investors should stay the course on LVTL at current levels, which represent a total cap/2003 cash EBITDA estimate of 9x, well below the company’s three-year estimated CAGR of +50% in cash EBITDA. • We maintain our STRONG BUY.