Mark Sue Cuts Price Target to Zero

By Mark Evans | Published: November 13, 2008

I’ve never seen this before: an analyst cutting his target price to zero.

But that’s what RBC Capital Markets’ Mark Sue has done with Nortel, going from $1.50 to zero while maintaining his “underperform” rating.

Sue believes there is a good possibility Nortel will file for bankruptcy protection given its cash burn, terrible capital markets and the fact it may not get enough from asset sales.

“The world moved on while Nortel was stuck in restructuring mode, and the lack of financial flexibility means Nortel has to rely on asset sales to fund future operations,” he said.

Without a bailout package from the Canadian government or a major investment, Sue thinks Nortel could run out of cash before its US$1-billion 2011 bonds mature.

Source: National Post

More: The Globe & Mail’s Streetwise blog also weighs in on Sue’s thoughts.

Technorati Tags:

[Slashdot] [Digg] [Reddit] [del.icio.us] [Facebook] [Technorati] [Google] [StumbleUpon]
This entry was posted in Analyst Coverage. Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.
  • http://nortelinsider.wordpress.com/ Desk Jockey

    Mark Sue has proven time and again (like most ANALysts) that he knows nothing and his predictions are no better than rolling dice. See previous posts on this very blog for details:
    http://www.allaboutnortel.com/2008/07/10/nt-cou…

    However, he is likely right on this call. Though the call on BK is a 50-50 chance likely, so flipping a coin could produce a prediction as accurate as this one.

  • Ex-Nortel

    Finally, an analyst who actually understands what the future holds for Nortel. Its debt obligations make any buy out impossible, and Nortel's mediocre product and distribution problems plus current economic conditions make it impossible for Nortel to systemically overcome its descent into bankruptcy.

    Declining sales and cash burn will force the BOD to declare bankruptcy at some point in the near future, therefore making Nortel shae holder equity worthless. Only within the confines of bankruptcy laws will Nortel be able to restructure itself into a viable entity.

    Once Nortel goes into bankruptcy, the Bondholders will decide how to restructure Nortel – and this means that the BOD and Mike Z's executive team will be history – because the Bondholders will bring in a new Board and management team to restructure and carve Nortel to recover the cost of their purchase of their bonds. Intrinsically, Bond holders are lenders and not investors.

  • Should have sold in Feb 2004

    Mark Sue is a complete scam! He is trying to get rich quick, pushing the stock to nothing and then making a large buy…probably like most other analysts. COLLUSION anyone?

  • notafan

    Mark Sue is an idiot. What's he trying to say? That Nortel should strive to reach the target price of 0? Perhaps Sue is wishing well for Nortel after all, since he's always bet the wrong way on his NT target prices.

  • The Psychiatrist

    As I 've stated before Mark Sue is one heck of a lousy analyst,when you look back on his numerous price target changes all within a relative short span(8 changes in about 18 months) just shows that his judgment and assessment of Nortel's business model and their industry are always after the fact. which would indicate that he doesn't really know more into the future about Nortel than the average joe does,come to think about it most analysts are like Mark Sue.

    Most of the time when he comes out with an adjusted price target it was always in reference to short term fundamentals and always finished his quotes by saying that Nortel is better suited to the longer term investor, just a couple of months back he was quoted as saying that Nortel could hit $18 a share by 2011 if things go smoothly,obviously he did a poor job of predicting the impact that the global economy would have on Nortel and the rest of the industry as did most other analysts.

    So why should anyone give him any credibilty based on his weak past analysis?

    Most analysts are in it for themselves and they would be liars if they told you otherwise,heck their upgrades and downgrades always come later than what is obvious to most,and this is no coincidence when it happens over and over again.

  • Should have sold in Feb 2004

    Again, what a joke…especially when he thinks they'll be around for a few years even with the current cash burn and referring to debt due in 2011. A LOT can change in 3 months, a we have all seen, let alone 2-3 years! RBC, please fire this guy!

  • buyonbadnews

    Correct me if I'm wrong but shouldn't Nortel be addressing the recent headlines about facing bankruptcy?

  • http://nortelinsider.wordpress.com/ Desk Jockey

    What would they say? “The reports of our bankruptcy have been greatly exaggerated…”

    They just reported Q3 earnings on Monday. That in effect is their statement on bankruptcy.

  • buyonbadnews

    Anything….let's here what they have to say. It's no different than any company that is facing a crisis.

  • buyonbadnews

    It seems they are listening…” Cost reduction and cash preservation are priorities – both to stabilize our financial footing as well as to provide funds for growth investments. We are moving forward in a determined fashion, and have carved a clear plan forward to strengthen our financial footing.” (Statement from Nortel today.

  • http://nortelinsider.wordpress.com/ Desk Jockey

    blah blah blah same old, same old

  • protosphere

    Same old is right

    Same old hype in press releases hitting the fan in desperation again today, a favorite ploy for years

    Same old ambiguous cheerleading resurfaces like his unrepentant 20 buck buying opportunities Aug/07 or his recent primal scream to employees they can not afford to fire because he can not sell MENs.

    I disregarded a single word Zerotel says and let the physics do the talking.

    Tooo many contradictions. No credibility let alone in the boat they are in. Forever crying wolf let alone in this increasingly dire trend with now a stock target of zero insults the intelligence of who ever he is addressing.

    Seems to trade with the exuberance of Air Canada or Stelco before they folded. Crazily.

    Nortanic is now Zerotel… target…zero

    Did he say what the “clear path” was, or is it based on even more what ifs which is not clear at all?
    Did they suddenly get thunderstruck with a brainstorm and an actual plan? I don't think so, same old hype and nonsense lacking any credibility in my view. Same old same old is right. Borderline shameless or politely put, unrepentant. =)

  • buyonbadnews

    “What they are doing in terms of tightening their cost structure — it is going to pay off,'' said Himanshu Shah, founder and chief investment officer of Raleigh, North Carolina- based Shah Capital Management, which is buying Nortel shares. “They need to do more.''

    Shah's firm owns about 4 million Nortel shares. He said Nortel will be able to refinance its debt and won't go bankrupt.

  • The Psychiatrist

    Mark,

    make sure that you blog about Nortel's roaring comeback today on both exchanges,you know so that your blog could be seen as being fair and balanced.

  • http://nortelinsider.wordpress.com/ Desk Jockey

    If I owned 4 million shares of NT I'd delude myself into thinking this as well.

  • Another Nortel Watcher

    In other words, Mark Sue feels that Nortel's target price is aligned with his credibility rating.

  • protosphere

    I think they call this a “dead cat's bounce” syndrome doc , hardly newsworthy, overshadowed by headlines calling for zero today.

    I account today's brief rise from, shorts sellers covering because it traded so low lately
    (hardly worthy of calling it a “roaring comeback” in my opinion)

    Money managers and many analysts no longer even track Nortel.
    It is not like they rebound even above delisting territory

    Their very fundamentals seem to be the focus lately, correlated with stock price, which clearly indicate they can not sustain themselves at this pace let alone in a worsening trend losing business, earnings, cash, employees, credibility, outlook, etc.,

    Also note that Nortel always did trade at a premium, and it always did disappoint. Most lost caught the falling knife if you look at the charts. Even this CEO averaging down around half a million bucks in the 7's…Target is zero.

    Relative to such a low it seems large but is short lived, if sustained at all. To entertain today's gains would be like to debate timing the markets, or picking lottery numbers for that matter =) Hardly worth debate.

  • protosphere

    no… Nortel's

  • http://nortelinsider.wordpress.com/ Desk Jockey

    I think he was being sarcastic, but regardless you are right. With penny stocks such drastic percentage swings are an everyday occurrence. IMO the low price is the final mark on the incompetence of this executive management and its BoD. How they can show no shame is beyond me.

    The death spiral is accelerating at a rapid pace. I hate be pessimistic but unfortunately it's hard to even see the glass as being half-full at this point. NT is hemorrhaging bad.

  • Mr Real

    Mark,

    TODAY is the reason i've been .itching about daily posts like “NT went down another 10,20,30%, etc, etc”. now that it went up 30%, are you going to blog about that as well? then back down 40%? back up 30? another 40 down? up another 30? etc, etc?
    cause if you don't, it gives cheerleaders the chance to point a finger at you and yell “negative nelly” at you :)

  • http://nortelinsider.wordpress.com/ Desk Jockey

    I agree that there has been too much reporting of the stock price (after all we can all find Google/Yahoo Finance) but nonetheless it is notable when the stock reaches an all-time low – which it seems to be doing more and more often these days.

    On the other hand, these huge swings are not expected for several reasons:
    1. The entire stock market when through a huge swing today.
    2. NT is a penny stock and by their very nature they swing huge all the time.

  • puddintane

    “That Nortel should strive to reach the target price of 0?”

    If this ultimately amounts to zero emissions (which is synonymous with “output”) somewhere then its to be seen as a positive. Thats the worthy, common goal the emerging global village (beyond US borders) shares.

    Looking forward, why not build refuges for the endangered polar bear on former Nortel property for future generations to enjoy? Then rename the North Pole “Nortel Pole” in honor of the company's pioneering green (non-monetary) initiatives?

  • puddintane

    “If/when Nortel fails it will have been all Sue's and AANs fault. They so negatively influenced global opinion of NT. Tsk.”
    Gotcha. Thats some deep, sharp, objective analysis, there:
    “Phillies fans booing them made the Rays lose the World Series. A championship franchise with an illustrous 10 year history ruined in only 5 games. Phillies last won the the Series 28 years ago. Meh.”

    Thinkers! Cisco is looking for people like you:

    “We absolutely will continue the share buyback program, and at the right point in time, hopefully when we have a better P/E, we will also, before I leave as CEO, make sure we pay a dividend,” Chambers told a shareholders' meeting on Thursday.

    The question of succession is a particularly sensitive one at Cisco, because there does not appear to be a consensus on who could be the next leader.

    Thinkers wanted!

    I recommend Mike Z. He would greenify the place within 3 years.

  • http://nortelinsider.wordpress.com/ Desk Jockey

    What exactly are you talking about and who are you quoting? If you read your post out aloud it makes absolutely no sense. Non sequitur to the maximus.

  • Pingback: Doomsday Scenarios Emerging | All About Nortel

  • puddintane

    Buying and trusting in Nortel stock, on the contrary…

  • puddintane

    “What exactly are you talking about and who are you quoting?”

    So you don't know who Cisco CEO John T. Chambers is. His bio and the quote I posted below on on this vast thingy called the “Internet”. You can “Google” things there, you know… cut and paste, hit “Enter”….

  • http://nortelinsider.wordpress.com/ Desk Jockey

    Part of meaningful discussion is providing context. Not everyone has the time to conduct thorough research to figure out exactly what you're talking about just because you choose to post a pretentious series of words.

  • http://nortelinsider.wordpress.com/ Desk Jockey

    I have no NT, nor have I ever owned any NT, nor will I *ever* own any NT shares.

  • nt_man

    too bad we've come to this… i just hope the damange is minimal for shareholders and employees

  • broadbandbill

    To my knowledge no analyst to date has ever set a target price of zero, thus I find Mark Sue’s target as a double-meaning message. Zero starts with the letter ‘Z’, which I find very cleaver; so I came up with yet another poem for Mr. Sue…–bb

    Mr. Sue is at it again,
    Setting the price but not as a fan,
    Shareholder value he says goes down to zero,
    Secretly, its what he thinks of a Macedonian hero.

    He says no, not this time or this place,
    Just trying to save some value and maybe his face,
    Trying all things; to little to late,
    Like one that died too early, called The Great.

  • Pingback: What Was Mark Sue Thinking? | All About Nortel

  • former NT guy

    Used to be a great company. Too many chiefs building their little empires, though. Not enough executives at the top with the guts to whip those little chiefs into submission. It's really sad to see how bad things have been for them though. I have a lot of fellow co-workers who are still there.

  • Clint

    That's right.
    Useless managers.

  • former NT guy

    Used to be a great company. Too many chiefs building their little empires, though. Not enough executives at the top with the guts to whip those little chiefs into submission. It's really sad to see how bad things have been for them though. I have a lot of fellow co-workers who are still there.

  • Clint

    That's right.
    Useless managers.

  • Pingback: Downfall « Nortel Insider - by Desk Jockey

  • TwitterCounter for @markevans
  • Seeking Alpha Certified