CIBC World initiated coverage of EarthLink (ELNK ) with a strong buy recommendation and established a $20 price target on the shares.
Analyst John Corcoran told S&P MarketScope he believes the battle for dominance of the narrowband world has already been won by AOL. However, with a new battle just starting in the broadband segment, Corcoran believes EarthLink is positioned to capture a meaningful share of expected growth over the next several years. He sees a three-year compound annual growth rate of 22% for revenues, from $1.26B in 2001 to $2.28B in 2004; and 54% for EBITDA, from $64.7M in 2002 to $236.3M in 2005. The analyst says EarthLink's strong cash flow growth story -- with limited downside risk -- should appeal to both value-oriented and growth-at-a-reasonable-price (GARP) investors.