City Comments On Cbeyond's Weakening Core Business Returns

In a report published by Citi, Cbeyond's CBEY core business is still weakening ahead of E.O.C. migration. Citi said that CBEY reported mixed 4Q results that displayed weakening core fundamentals, relating to an erosion in ARPU and continued elevation in estimated subscriber acquisition costs, excluding acquired Cloud results & Ethernet-Over-Copper (EOC) migration costs. “We maintain our Hold rating on CBEY as its EV/OIBDA valuation of 5x on our downwardly-revised 2011 OIBDA forecast is at the low-end of its peer group and partly reflects the challenges and execution risk associated with its pending technology migration; prefer Buy-rated TWTC.” Cbeyond closed yesterday at $13.41.