We maintain our Hold rating for Centennial Communications Corp. (CYCL), a regional provider of wireless and integrated communications, based on the company's recent operational performance driven by stronger than expected revenue and earnings, along with sustainable subscriber growth.
New initiatives in fiscal 2009, including network infrastructure upgrades in the U.S. and new unlimited tariff plans in Puerto Rico, are expected to accelerate overall business performance.
However, we remain concerned with competitive factors in CYCL's coverage markets that may challenge customer retention and pricing structure and higher churn rates in some operating regions. Moreover, the company's high net debt level of approximately $1.9 billion and limited cash on its balance sheet remain issues to consider.
Centennial is trading at a P/E multiple of 12.8x, which represents a discount to the telecom-wireless industry group. On the basis of enterprise value (defined as market cap plus debt minus cash) to EBITDA, the stock is trading at a premium to the peer group average. We set a six-month price target of $4.00, based on approximately 5.6x EV/EBITDA for fiscal 2009.
Anindya Barman contributed to the report.
Read the full analyst report on CYCL
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