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Q3″ “Good But Not Impressive”
By Mark Evans | November 7, 2007
Nortel shares may have jumped 17% yesterday after the company posted a third-quarter profit but UBS Securities analyst Nikos Theodosopoulos has less enthusiastic approach.
In a research report entitled “3Q07 Review: Good but not impressive”, Theodosopoulos said gross margins beat expectations at 43%, investors need to pay attention the sustainability of Nortel’s LG-NT joint venture, which contributed $65-million of operating profits on revenue of $200-million to $250-million. “This level of profitability is well above recent trends and we question the sustainability of this level of profitability,” he said.
As well, Theodosopoulos points out that Nortel had foreign exchange gains of $67-million.
UBS rates Nortel a “neutral” with a target price of $20 - based on a 15x earnings multiple applied to its 2009 EPS estimate of $1.32.
Topics: Analyst Coverage |