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Technology Stocks : Winstar Comm. (WCII) -- Ignore unavailable to you. Want to Upgrade?

To: silicon warrior who wrote (8631)	10/9/1998 12:55:00 PM
From: SteveG	Read Replies (2) \| Respond to of 12468

Here are some highlights from the Grubman report out this morning: CLEC stocks are absurdly oversold, discounting well beyond catastrophic situation Current stock prices reflect absurdly high cost of capital & absurdly low implied mkt share over a 10 year period. In fact, current prices value CLECs on FV/Net PP&E & FV/revs equal or below the Bells on 1999 numbers. CLECs we follow are in good shape from liquidity standpoint. Every CLEC we follow is fully funded through end of 1999 and into year 2000. Furthermore, current mkts will shut out new CLECs which is good for existing names. CLECs sell same domestic recession-resistant product that Bells do (local dial tone) & sell it at a discount. Thus, if Bells are viewed as defensive safe havens because of their business so should be the CLECs. Secular story & long-term investment thesis remain unchanged. CLECs also represent strategic assets in a consolidating industry. Recognizing and accounting for higher risk and tightening liquidity, we are adjusting price targets to reflect higher required hurdle rates, rates of return, higher betas, all of which has led us to raise our average discount rate from 14.5% to 17.3% and average implied cost of equity from 16% to 21%, levels that are double RBOC WACCs and cost of equity. Even with this ratcheting up of required rates of returns, new lower price targets still represent huge upside to current prices (average 180%). Our new price targets reflect the reality of a higher risk scenario. However current CLEC prices reflect a going-out-of-business scenario which most certainly does not exist. SteveG