Goldman Sachs initiated coverage on Earthlink (ELNK ) with trading buy.
Analyst Anthony Noto says he expects that a $2 price increase on basic service by the beginning of 2002 could boost the company's 2002 EBITDA to $95 million (up from $25 million without an increase). He believes this, combined with steady progress toward positive EBITDA by yearend will serve as catalysts for shares. Longer term, Noto views Earthlink as a cash flow story (vs. high growth) with low teens top-line growth and 50%-plus cash-flow growth.
He says the company has enterprise value of $1.1 billion and is trading at 11.9 times his 2002 EBITDA estimate, and 0.8 times his 2002 revenue estimate. Noto has a $19 target.