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Zack’s Sees Stock Price Volatility
By Mark Evans | June 17, 2008
Add Zack’s Investment Research to the growing number of analysts coming around to Nortel. In a research note, Zack’s maintained its “hold” rating with a six-month target price of $12.
“Nortel is currently trading at 61.3x our fiscal 2008 earnings estimates. This represents a significant premium to both the forward S&P 500 average and the peer group average. In the near-term, we believe the stock price will remain volatile with the possibility of an economic recession in the U.S adding to the near-term risk factors. Therefore, we set a six-month valuation target of $12, which is based on a Price/Sales ratio of 0.53x our fiscal 2008 sales estimates.”
Zack’s said it was encouraged by Nortel’s decision to focus on LTE while partnering with Alvarion for Wi-Max.
“The company has taken a strategic decision to revamp next-generation (4G) wireless offerings in order to introduce WiMax and LTE solutions faster to the market, in some cases ahead of its competitors. Telecom gear manufacturers are likely to be challenged by tightened capital budget of carriers due to ongoing recessionary conditions in the global economy. It was necessary for management to appropriately plan its product roadmap to focus more on growth markets.
We believe this new business strategy will solidify Nortel’s position in the wireless equipment market. Furthermore, the company received a major contract for its high-speed Metro Ethernet switch from Verizon (VZ).”
Source: iStockAnalyst
Technorati Tags: LTE, Nortel, Wi-Max
Topics: Analyst Coverage |