Level 3 (LVLT): Overbought Stock Of The Year, Or Will Company Be Bought?

It made some sense for Level 3 (LVLT) to be up yesterday. It was. It moved from $3.53 early on June 3 to $4.07 yesterday.

LVLT did sell its publishing business for $129 million, but that was expected.

Today, the stock is up to $4.48 on almost 90 million shares. On a good day it clears 24 million.

As 24/7 Wall St. pointed out yesterday, JP Morgan may have made some good comments about the company, but that would not account for a spike that has taken it to a level approaching three times its 52-week low of $1.68. The one call that also helped was UBS raising its price target, although its rating was maintained as Neutral. 

LVLT has said it will break even this year, but the company says that every year.

The firm does have a huge short position of 238 million shares as of the last time the NYSE posted numbers.Would that drive the shares up almost 14% in a day? Probably not.

No one should be astonished if a buyer is having a look at the goods. LVLT does have $6.8 billion in debt, but its market cap is only $6.8 billion.

Since the company is trading for less than three times revenue on a market value plus debt ratio, there could be a buyer.

Douglas A. McIntyre