Goldman Sachs: Buy Level 3 Communications And 'Get Your Fiber'

In a report published Thursday, Goldman Sachs analyst Brett Feldman initiated coverage of Level 3 Communications, Inc. (NYSE: LVLT) with a Buy rating and $67 price target.

"LVLT has been one of the best fundamental turnaround stories in telecom as a result of improved execution and transformative M&A. With the company on track to hit the low-end of its leverage target by mid-2016, we believe LVLT is approaching the second leg of its transformation," Feldman stated.

The analyst expects the company to use its robust balance sheet and cash flow to fund capital returns, undertake accretive acquisitions or take on high ROIC projects. There appear to be multiple potential catalysts for the stock in both the near- and the long-term.

Although the company has not yet to announce how it intends to use its FCF, Feldman believes that there is long-term upside potential from Level 3 redeploying its capital. In the nearer term, however, the analyst expects potential upside to come from a faster recovery in the EMEA, sooner than expected realization of synergies from the TW Telecom, Inc. (NASDAQ: TWTC) deal.

According to the Goldman Sachs report, the company could also see margin growth via an improvement in internal efficiency. In addition, potential upside could also come from "incremental refinancing activity as call dates approach next year."