Level 3 Hits 52-Week Low As Wall St. Ponders Telecom

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24/7 Wall St. mentioned a few days ago that Level 3 (LVLT) has traded off sharply this year, probably due to its huge level of junk debt. The company has been able to push out the maturity date on some of the debt, but LVLT is still struggling with cash flow.  The shares hit a new 52-week low today trading at $4.41, down from their 52-week high of $6.80.

The Alcatel-Lucent (ALU) debacle has Wall St. taking a look across the entire telecom and telecom equipment sector. Another weak player, Nortel (NT), is taking a beating. Motorola (MOT), which has a large telecom equipment division, is also off.

On the other hand, the companies that own the phone systems and have ALU, MOT, and NT as suppliers are up. AT&T (T)  and Verizon (VZ) are both up about 2%. Both trade very near 52-week highs.

Looking at the landscape, investors appear to be saying that in telecom equipment, it is better to be a buyer of equipment than a seller, it is better to have the consumer and not the enterprise as a customer, and it is best to stay away from segments of the industry that are becoming commodities.

Douglas A. McIntyre