IP traffic is expected to witness double-digit growth, thanks to the delivery of content over the internet. The market is placing too much trust in bubble stocks like Netflix for internet TV growth. Buy Level 3 instead, which is exposed to the growth of IP and internet TV indirectly. Fixed costs, high bandwidth trend, internet TV competition and relative valuation is what makes LVLT a buy and Netflix a sell.
Investing in internet content delivery players is one way to ride the IP traffic growth wave. We have seen shares of Netflix, a leading internet streaming player, rise 184% during the last couple of years. The transition of video delivery towards internet is benefiting the said player. However, going forward, there are numerous uncertainties that make Netflix not a very intelligent investment. There are, though, other companies that can benefit from the growth of IP traffic and high bandwidth trend. One such company is Level 3 Communications, Inc. Following is our detailed take on why LVLT is better positioned than Netflix to capitalize on the growth prospects of IP traffic and internet delivery of digital content including video.
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