Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high
Qwest. (Q). Qwest needs to do something to keep from becoming a smaller and smaller part of the telecom universe in the US. With the AT&T merger with BellSouth, the new entity and Verizon dwarf Qwest in revenue, customers, and cashflow. Qwest has a tiny wireless operation. Maybe it can merge with Sprint.
Goldman Sachs has a "sell" rating on Qwest with a price targer of $7.50, which is well below the current price.
Qwest is trying to get as much leverage as it can out of its landline customers. It recently signed a deal to distribute DirecTV programming.
The question is where Qwest can turn for any growth. As Morningstar pointed out regarding Qwest’s third quarter: "The firm did see a sharp acceleration in the number of phone customers lost during the quarter." Even if Wall St. questions Verizon’s plan to use fiber to deliver high speed access to the home, Qwest has neither the balance sheet nor the plans to make a significant upgrade to its network. That means it will be tougher for the company to hold off VoIP from cable companies and other providers.
Not many positives.
Factors that could improve on target forecast: A buyout.
Factors that could drive stock below forecast: Faster than expected attrition of the company’s landline customer base.
Douglas A. McIntyre can be reached at [email protected]. He does not own shares in companies the he writes about.
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