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Zacks Maintains “Hold” Rating on NT
By Mark Evans | February 21, 2008
Zacks Investment Research has maintained its “hold” rating on Nortel but has reduced its target price to $15 based on the belief that telecom equipment makers will be affected by tighter capital spending budgets amid expectations of a recession in the U.S.
Zacks said Nortel is currently trading at a fiscal 2008 price-earnings ratio of 35.1, which is a premium to the forward S&P 500 average and the telecom equipment group.
“In the near-term, we believe the stock price will remain volatile,” Zacks said in a research report. “The possibility of an economic recession in the U.S. may add some short-term fluctuations. Therefore, we maintain our Hold rating with a reduced valuation target of $15, which is based on a price/sales ratio of 0.65x our fiscal 2008 sales estimates.”
A silver lining for Nortel watchers and investors is that Zacks said “Nortel has a strong market position supported by the companys gradual introduction of innovative customized products specifically designed for IP-based converged networks and enterprise solutions”, while adding that “Effective product cost management and ongoing restructuring activities have improved the companys gross margin.”
Nortel shares were trading at $11.27 at mid-day.
Source: TradingMarkets.com
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