UPDATE: Jefferies Initiates Coverage on Level 3 Communications with Hold Rating, $22 PT on Requirement for Growth

In a report published Wednesday, Jefferies analyst Thomas Seitz initiated coverage on Level 3 Communications LVLT with a Hold rating and $22.00 price target. In the report, Seitz noted, “Level 3 has a unique assortment of fiber assets spanning 450 cities across the Americas, Europe, and Asia, 100k intercity route-miles, 30k metro route-miles, 35k subsea route-miles, and ~350 data centers. In our view, beyond the obvious cost synergies, the October 2011 Global Crossing acquisition increased network reach, enhanced scale, improved service portfolio, and substantially boosted the balance sheet and credit profile. With the acquisition, the company pointed to $300M of cost synergies it expected to achieve in 18 months, which appears to be on schedule. Additionally, we believe Level 3 could also benefit from revenue synergies from multinational enterprises with its much more geographically diversified network. LVLT trades at a discount to its smaller fiber peers – TWTC and CCOI – which grow faster, carry a lot less debt leverage, and could be acquisition candidates. While we remain constructive, we believe LVLT needs to deliver on its promise of growth before we see significant multiple expansion.” Level 3 Communications closed on Tuesday at $20.66.