EarthLink (ELNK) Remains Significantly Undervalued Given Potential - Barron's
Tweet
Share
E-mail
Get Alerts ELNK Hot Sheet
Join SI Premium – FREE
EarthLink (Nasdaq: ELNK) shares are higher Wednesday amid a bullish article in Barron's issued late Tuesday.
Barron's argued the once-prominent dial-up provider is trading at "rock-bottom" valuations -- just 1.1 times price-to-book and about three times enterprise value-to-EBITDA. Further, with a dividend yielding 2.5 percent, its a stock many could just sit and hold onto while still collecting.
At $8, shares are just about 80 percent lower than where they were in 1999. Barron's pointed out shares haven't cracked the $10 mark in about four years.
But tides are a-shifting at EarthLink. According to Barron's, sales at EarthLink's Internet service provider (ISP) unit dropped from 67 percent of total revs in 2010 to less than 25 percent in the most recent report. It's dial-up unit contributes 7 percent to the bottom-line, a number which is staggering. EarthLink still has about 1.35 million ISP customers, a unit which boasts margins at or above 50 percent.
To combat declining ISP revs, EarthLink has made strategic acquisitions aimed at gaining better assets in the fiber-optic network market. The company also debuted a slew of services for business computers like cloud computing and data security.
How much fiberoptic network does EarthLink have? A $370 million deal to acquire One Communications and $516 million deal for ITC DeltaCom puts EarthLink's network somewhere in the 28,000 mile range. With demand for broadband increasing, EarthLink continues to sit pretty; the recent $2.2 billion bid for AboveNet (Nasdaq: ABVT), which boasts 44,000 miles of fiberoptics, affirms that. In addition, much larger telecoms like AT&T (NYSE: T) and Verizon (NYSE: VZ) continue to be valued at two and three times that of EarthLink.
Barron's noted EarthLink has a rare opportunity in the mid-sized business market -- one that larger players tend to neglect. The smaller businesses may have two or three locations its looking to easily -- and cheaply -- connect, an area EarthLink thrives in.
Looking ahead, EarthLink needs to prove it can integrate its services into one package, and make that package reliable enough that businesses will come back. Barron's said, though, with its high-margin ISP business still flat, EarthLink is a chance to gamble on a transitional company, and do it at a low cost.
Shares are up about 0.25 percent Wednesday.
Barron's argued the once-prominent dial-up provider is trading at "rock-bottom" valuations -- just 1.1 times price-to-book and about three times enterprise value-to-EBITDA. Further, with a dividend yielding 2.5 percent, its a stock many could just sit and hold onto while still collecting.
At $8, shares are just about 80 percent lower than where they were in 1999. Barron's pointed out shares haven't cracked the $10 mark in about four years.
But tides are a-shifting at EarthLink. According to Barron's, sales at EarthLink's Internet service provider (ISP) unit dropped from 67 percent of total revs in 2010 to less than 25 percent in the most recent report. It's dial-up unit contributes 7 percent to the bottom-line, a number which is staggering. EarthLink still has about 1.35 million ISP customers, a unit which boasts margins at or above 50 percent.
To combat declining ISP revs, EarthLink has made strategic acquisitions aimed at gaining better assets in the fiber-optic network market. The company also debuted a slew of services for business computers like cloud computing and data security.
How much fiberoptic network does EarthLink have? A $370 million deal to acquire One Communications and $516 million deal for ITC DeltaCom puts EarthLink's network somewhere in the 28,000 mile range. With demand for broadband increasing, EarthLink continues to sit pretty; the recent $2.2 billion bid for AboveNet (Nasdaq: ABVT), which boasts 44,000 miles of fiberoptics, affirms that. In addition, much larger telecoms like AT&T (NYSE: T) and Verizon (NYSE: VZ) continue to be valued at two and three times that of EarthLink.
Barron's noted EarthLink has a rare opportunity in the mid-sized business market -- one that larger players tend to neglect. The smaller businesses may have two or three locations its looking to easily -- and cheaply -- connect, an area EarthLink thrives in.
Looking ahead, EarthLink needs to prove it can integrate its services into one package, and make that package reliable enough that businesses will come back. Barron's said, though, with its high-margin ISP business still flat, EarthLink is a chance to gamble on a transitional company, and do it at a low cost.
Shares are up about 0.25 percent Wednesday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Interactive Brokers reports June trading metrics with 53% DART rise
- Interactive Brokers adds Nextrade ATS for Korean equity trading
Create E-mail Alert Related Categories
Insiders' BlogRelated Entities
Barron's, DividendSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
