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NT Could Hit $18 if….
By Mark Evans | July 10, 2008
RBC Capital Markets analyst Mark Sue believes Nortel shares could hit $18 by 2011….if everything goes perfectly according to plan.
“If things line up exactly for Nortel and the company hits the high end of its operating margin targets, Nortel can potentially generate approximately US$1.50 in earnings in 2011, Mr. Sue said in a research note. “Applying a multiple of 12 to 13 times gets us to a potential stock price of US$18 vs. yesterday’s close of US$7.04.
In the gambling world, this is what you would call hedging your bets. It’s a safe way of making a bold statement but adding enough caveats to protect yourself if things don’t happen in the way you envision.
At least Sue concedes he may be bullish, adding that “operating margin recovery has been insconsistent and visibility on the top line growth rate remains limited. Furthermore, Nortel’s other income/expense items remain highly variable’.
For the time being, Sue is maintaining his “sector perform” rating and US$8 price target.
Source: National Post
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