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Needham & Co. initiated coverage of

Level 3 Communications


, saying the company's network and bandwidth services are moving ahead of the competition.

"The company has managed through the communications downturn and is starting to see signs of improvements in its business, characterized by decreasing disconnects and better customer credit quality, but a return to organic growth is likely one to two quarters out," analyst Vik Grover wrote in a research note.

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Grover started Level 3 with a buy rating and a 12-month price target of $8.

Shares of Level 3 were up 35 cents, or 7.3%, at $5.14 in morning trading on the



The analyst also believes Level 3 is well-positioned to acquire "marginal players" in a round of consolidation, but he didn't provide an expected timeline.