Qwest shares have climbed steadily since the beginning of the year, from the mid-50s in January to the mid-90s today. Competitor Level 3 has seen its stock price jump 30 percent in a month's time. And Williams' shares have been in strong demand in the wake of a planned $750 million IPO for its communications division.
To be sure, broadband stocks are on a tear. Analysts say investors have caught on to the potential of high-speed data networks to change the way we work and do business on the Internet.
"Almost every derivative of the broadband sector has seen tremendous movement over the last two weeks," said Mark Langner, an analyst at investment bank Hambrecht & Quist. "The common thread is that all of these players either put customers on the broadband network or they take advantage of that broadband network."
Stocks surged to record highs today in what one analyst called a "leap frog effect" caused by several digital subscriber line announcements, anticipation over quarterly earnings, and optimism following a series of strong broadband IPOs.
Covad shares have followed a strong upward path since the firm's public offering. The stock has nearly tripled since the IPO, and broke a new 52-week high today of 100.5. Shares were pushed higher by a number of new DSL resale deals, and an appearance by Covad chief executive Robert Knowling Jr. on cable business station CNBC, according to analysts.
Concentric has nearly doubled its share value over the past month. After trading in the mid-50s in March, the stock now trades over 100, hitting a new high of 109.5 today. Espire nearly tripled its daily volume last week following a Business Week article that said the high-speed data company could be a takeover target. Shares have traded as low as 4.3125, but as high as 23.375, in the past 52 weeks.
Looking to @Home
Some analysts are pointing to @Home as the reason for the recent broadband breakout.
"What's driving this is @Home," said Tom Friedberg, an analyst at Janco Partners, an equity research firm specializing in the telecommunications industry. "Many people have valued Covad and Rhythms on @Home and if @Home comes in ahead of its numbers the stocks may continue to run. If not, we may see a sell off on Wednesday."
@Home is scheduled to report first quarter earnings and subscriber numbers tomorrow after the market closes.
Indeed, Pacific Crest Securities analyst Brent Bracelin compared Covad to @Home, a growing Net access provider which uses the competing cable modem technology, when initiating coverage with a "buy" rating and setting a $100 price target on Covad today. Bracelin said Covad and its DSL competitors could perform even better than Wall Street darling @Home has.
"DSL service providers will become key enablers of broadband Internet access outpacing the sales growth of cable modem providers such as @Home and Road Runner," he wrote in a report.
@Home, too, finished at a new all-time high today. @Home shares gained more than 9 percent to close at 189.3125. The stock has traded as high as 178.5 and as low as 23.5 in the past year.
Langner said increased visibility has helped investors become more familiar with broadband access providers such as @Home, Covad, and Rhythms, among others.
"People are beginning to realize that no longer will broadband be the purview of just the Fortune 1000," he said. "I think there is a broader movement to the broadband sector."
For example, @Home's stock price has increased nearly 67 percent in a month, while Qwest shares have gained more than 30 percent over the same period.
"Some high profile IPOs such as Rhythms have had a strong impact," Langner said.