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Level 3 Prospects Decent Despite ‘Anemic’ Growth Expectations

At least one analyst found enough optimism in Level 3 Communications‘ earnings report to raise his price target on the company’s stock from $16 to $18.

Level 3 said on Wednesday that it cut its loss from $62 million in the year-ago quarter to $24 million last quarter. Total revenue was off slightly from a year ago, coming in at $1.57 billion. The international communications company, which is still billions of dollars in debt, just signed a new deal with Starbucks and Google to upgrade existing Wi-Fi devices and manage in-store connectivity at Starbucks stores around the country.

Although the newly-signed contract with Google/Starbucks could help offset some of the revenue drag, we note that secular headwinds from legacy businesses continue and organic revenue growth likely remains anemic,” said Canaccord Genuity analyst Greg Miller. With very thin margin for positive free cash flow and higher net leverage, we continue to remain on the sidelines until the new management team demonstrates more concrete evidence of a successful business transition.”

Nonetheless, Miller increased his target price for Level 3 stock. He maintained, however, a “hold” rating. The company’s stock price was up 2 percent in Thursday trading, as of 12:31 p.m. ET.

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