Not sure why Paradigm Capital analyst Barry Richards envisions but a morning research note this morning leaves no doubt he’s ultra-bullish on NT.
In initiating coverage, Richards has a “buy” rating on Nortel with a target price of $23 – sharply higher than the current high of $15.50 and median target of $10 on Yahoo Finance. Richards describes Nortel as “profoundly undervalued today”.
Longer-term, he believes the shares could hit $50 based on the thesis it could trade at 1.7-2.0x FY10 sales, compared with 0.5x in 2008.
Here’s his entire note, entitled “Back to the Future”:
Nortel Networks is one of the world’s largest information technology equipment vendors with a wide range of technologies including wireline telephony, cellular, fiber optics and enterprise networking. Once a C$400b company, Nortel has endured a litany of financial restatements, lawsuits and class action suits.
The popular sentiment towards Nortel continues to be very negative and the stock price is severely depressed. We believe Nortel has resolved the last of
its outstanding extraneous issues and the outlook for the company is vastly improved. Key catalysts could include improved quarterly financials, large contract wins and positive industry related developments including wireless auctions and fiber optic deployments.
The stock trades at the lowest multiples in the industry despite the many operating improvements in recent results, including very encouraging Q1 results. We believe Nortel is profoundly undervalued today, trading with a $4b market cap or just 0.5x FY08 sales and 4.7x EV/EBITDA. We see positive changes in the wireless and internet markets and contrary to popular belief we should see significant carrier investment in these areas over the next 10 years.
We like the new management team at Nortel and with upwards of $1b expected in EBITDA this year, we think Nortel will generate normalized free cashflow this year. We initiate coverage of Nortel with a Buy rating and a $23.00 target, based on 10x FY08 EBITDA or ~1x FY08 sales. Longer term we believe the stock could revisit industry averages of 1.7-2.0x FY10 sales or approximately $50 per share.
Update:24/7 Wall St. has a post on Richard’s target asking whether it’s “Gutsy or Crazy?”
Wow – my Nortel Stock Options have evolved to have gills over the past 7 years. Maybe they can spend some time above water.
IT Guy
A Lehman Brothers analyst report predicting $150 oil was released on the same day as this Paradigm analyst report on Nortel. Markets reacted to each by sending oil up $11/barrell and Nortel down 6%. Clearly only one of the two analysts is being taken seriously by the market. I smell another Abbey Joseph Cohen at work…
Not an analyst
It is simply amazing how the person calling himself an analyst can fall for the same fallacy every single time. They look at meaningless numbers and try to use them to predict the unpredictable. When they “get unlucky” in their predictions, oh well, they tried and their explanations always looked intelligent both before and after the fact. If they “get lucky” occasionally it only encourages them to generate more meaningless predictions. It's funny to watch those “fundamental analysis” guys to bash the “technical guys” (who are of course also idiots) for being “superstitious” in their attempt to predict future stock prices based on past data such as charts, etc, but then they turn around and produce their own marvelous predictions that are just about as worthless as the garbage that technical “analysts” put out. Instead of questioning the leadership and trying to keep them accountable for their actions or inactions, the analyst community only encourages them to continue running in the “fake it till you make it” mode.
jdawg
I love the comment “We like the new management team”……amazing. Ask the people who really know them (like Hackney) how much they like them. When the leadership of a company has no honesty or integrity any success is short lived…..
mag6488
Well, I'd like to see an analyst consensus. In fact, I'd be delighted if I could at least havea look to the strategy of the management team. Maybe can we look at a potential turnaround in the mid term. Meanwhile, I'm still somehow sceptical.
mag6488
Well, I'd like to see an analyst consensus. In fact, I'd be delighted if I could at least havea look to the strategy of the management team. Maybe can we look at a potential turnaround in the mid term. Meanwhile, I'm still somehow sceptical.
Richards Ultra-Bullish on NT; Sees $50 Stock Price
Not sure why Paradigm Capital analyst Barry Richards envisions but a morning research note this morning leaves no doubt he’s ultra-bullish on NT.
In initiating coverage, Richards has a “buy” rating on Nortel with a target price of $23 – sharply higher than the current high of $15.50 and median target of $10 on Yahoo Finance. Richards describes Nortel as “profoundly undervalued today”.
Longer-term, he believes the shares could hit $50 based on the thesis it could trade at 1.7-2.0x FY10 sales, compared with 0.5x in 2008.
Here’s his entire note, entitled “Back to the Future”:
Update: 24/7 Wall St. has a post on Richard’s target asking whether it’s “Gutsy or Crazy?”
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