Buoyed by year-over-year improvements in profitability in the wake of first-quarter results, Merriman analyst Tim Savageaux has maintained his “buy” rating on Nortel.
In a research note, Savageaux said:
“We believe Nortel has done more than enough both over the past two years and in a surprisingly strong 1Q to merit a revenue multiple above one and P/Es in double digits. Fears of overexposure to CDMA markets for profitability proved unfounded, with solid operating profitability reported both with and without a large LG-Nortel contract.
Also, for the first time, the company has shown strong evidence of SG&A expense reductions and associated operating leverage. The company reiterated growth (low single digit) and profitability (op margin up 300 basis points Y/Y) guidance for the year and we continue to find the shares dramatically undervalued.”
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