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Needham initiated coverage of Level 3 Communications (LVLT
) with buy and an $8 12-month target.
Analyst Vik Grover says he sees Level 3, which operates a 22,500-mile international Internet Protocol network, breaking away from the pack in network services and bandwidth markets -- aided by a strong liquidity position of $1.7 billion, annual EBITDA of several hundred million dollars, and its positive, operating free cash flow position.
Grover says the company managed through a communications downturn, and is starting to see signs of improvements, characterized by decreasing disconnects and better customer credit quality, but he thinks a return to organic growth is likely one or two quarters in the future. He sees substantial upside to earnings in 2004.