Potential Comcast Bid For Level 3 Could Be In $72-$80 Per Share Range

Level 3 Communications, Inc. LVLT shares are up 3.6 percent following a potential buyout by Comcast Corporation CMCSA. Stephens analyst Barry McCarver says a Comcast bid makes a lot of sense and could provide major upside for Level 3 shares.

Up to this point, one of Comcast’s major hurdles in its venture into the enterprise space has been its lack of a large fiber network.

“We think acquiring an operator like LVLT makes sense due to the size of its global network, extensive enterprise customer relationships, and the amount of time it would take to build on its own,” McCarver explains.

Related Link: Level 3 Shares Spike After Benzinga Pro Reports Company Considering Strategic Alternatives

Comcast announced back in 2015 it was creating an Enterprise Services unit, and McCarver believes an acquisition of Level 3 would put Comcast in a position to directly compete with AT&T Inc. T and Verizon Communications Inc VZ.

McCarver anticipates a buyout would likely take place at between 12x and 13 x fiscal 2017 EV/Adj. EBITDA. Based on Stephens’ estimates, that means a potential takeout price in the $72-80 range.

Stephens maintains an Overweight rating and $63 price target for Level 3's stock.

Disclosure: the author holds no position in the stocks mentioned.