William Blair & Company initiated research coverage of Neutral Tandem, Inc. (Nasdaq:TNDM) ($19.32) with an Outperform rating and Aggressive Growth company profile. Neutral Tandem is the premier independent tandem company providing wireless, wireline, and broadband companies with a neutral infrastructure for exchanging voice traffic, eliminating the need to rely on the incumbent local exchange carrier (ILEC) to complete calls.
Analyst Jeff Rosenberg estimated that the company would earn $0.28 per share in 2007 and $0.48 per share in 2008.
"We believe that Neutral Tandem serves a rapidly growing segment of the telecom market and has the opportunity to expand into new geographic markets and grow market share with its customers," Rosenberg said. "Specifically, we expect geographic expansion to cumulatively equal 50% growth in the company's served market. Combined with continued high-single-digit growth in the served market itself and ongoing share gains as the company expands penetration in its existing market, we believe Neutral Tandem can grow its core business at a high-teens to mid-20% rate compounded over the next several years."
"Longer term, we believe Neutral Tandem can leverage its unique tandem connection network to offer additional value-added services that could become significant revenue growth and profitability drivers," he added. "These opportunities include long distance, international, and additional network services."
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