Level 3 Should Consider Sale Given Low Interest Rate Environment, According To Wells Fargo

Shares of Level 3 Communications, Inc. LVLT surged this week after Benzinga Pro reported the company is consider strategic alternatives, including a potential sale of itself.

The report has created a large amount of investor interest while some of Wall Street's top analysts also offered their opinion.

In a new report on Friday, Wells Fargo's Jennifer Fritzsche suggested Level 3 Communications is "more of a near-term buyer than seller." However, she added the opposite case does have some merit as interest rates are sitting at low levels and fiber being a core of many companies' strategies.

Fritzche said a purchase of Level 3 Communications "could be strategic" in various sectors, including the telecom, cable and Internet/content industries. These sectors all "recognize the importance of fiber in facilitating the growing demand for bandwidth."

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

The analyst also suggested an acquisition of Level 3 Communications would offer cable companies the ability to "quickly" scale its enterprise offerings by leveraging the company's 106K intercity fiber route miles and 67k metro route miles.

Finally, a "more out-of-the-box" suitor to acquire Level 3 Communications would be a large Internet or content company as fiber is likely to play a large part in their longer-term strategies.

Shares of Level 3 Communications remain Overweight rated with a valuation range raised to $68-70 from a previous $60-62.