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Stewart Down NT’s Short-Term Prospects
By Mark Evans | January 19, 2008
Financial Post columnist Duncan Stewart is downright bearish when he comes to looking at the prospects for Nortel shares over the next six months - a marked contrast to bullish reports recently by TD Securities’ Chris Umiastowski and Scotia Capital’s Gus Papageorgiou.
While Nortel shares have struggled recently, Stewart believes now is not a buying opportunity.
“Nortel is indeed trading at low historical valuations. But my research tells me that the next six months will see investors’ feelings towards the telecom equipment manufacturers get worse, not better. And despite Mike Z’s [Nortel CEO Mike Zafirovski] best efforts on the factors he can control — costs and products — the factors that are out of his control will dominate investor sentiment and Nortel’s share price.
I wouldn’t short Nortel here — it is too cheap to do so safely. The company could get bought, and the possible downside from here is limited to perhaps another $2 to $3, implying a $10 to $11 floor price over the next six months.”
For what it’s worth to NT watchers, Stewart said he would also short Ericsson, which currently sports a price-to-sales multiple almost double Nortel and Alcatel.
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