Short interest in Level 3 (LVLT) rose 6.2 million shares in January. The total short position in the company, at 108.8 million, is second only to Sirius (SIRI) among stocks traded on Nasdaq.
There is a tug of war about the future price of Level 3. Over the last three weeks, UBS has initiated the stock at "neutral" and DeutscheBank and Janco have downgraded the shares to "sell". During the same period, Cowen and Credit Suisse have moved the stock up to "outperform".
The share have run like a scalded dog. Over the last six months, they are up almost 60% to $6.17. But, ahead of the earnings call on February 8, some investors believe that results will have to be spectacular to keep the run from reversing itself.
Level 3 has made several moves that Wall St. likes. It cut debt by getting investors to exchange convertible notes to common shares. And, it strengthened its portfolio of businesses by purchasing the content deliver business operations of Savvis (SVVS).
But, some short sellers on Wall St. are concerned that "a strong wind can not blow all say" as the Chinese Taoist philosopher Lao Tzu used to say.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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