本文发表在 rolia.net 枫下论坛Slowly, but surely, the analyst community is starting to look favourably again upon Nortel Networks Corp.
The latest analyst to clamber back on the bandwagon is Canaccord Capital's Nick Majendie, who yesterday came out with an "overweight" recommendation and a 24-month stock price target of $3.90.
Mr. Majendie's optimism is based on his view that Nortel will be profitable by the second quarter of next year -- meeting the goal that Nortel chief executive Frank Dunn has been advocating for several months.
Mr. Majendie is also looking for Nortel's gross margins to improve to the mid-40% range from 38% in the third quarter, following the sale of the company's optical components business.
This gross margin target represents a return to the record highs when Nortel's optical business was booming.
If these assumptions materialize, Mr. Majendie said, it will not take long for investors to pick up on the Nortel story.
Investors are hungry for positive news, he said, pointing to the performance of Telus Corp. shares after the telecom carrier started to talk about improved cash flow in 2003.
"My take is that if the Street gets any sense of confidence [Nortel] can make money or break even by mid-year next, the stock will be $4 in a heartbeat," he said.
Mr. Majendie's "overweight" rating and expectation that Nortel can have a profitable quarter in 2003 puts him in lightly tread territory. In the past three months, the only other analysts to have a rating above "market perform" or "hold" are RBC Capital Markets' John Wilson and Dresdner Kleinwort Wass' Ariane Mahler, who left the investment firm recently.
Mr. Majendie is comfortable with his against-the-grain approach. "When you are running money, you often do best when you are slightly against the others," he said.
"We have made a lot of money in Telus this year by going against the grain."
It should be noted that while Mr. Majendie is more enthusiastic about Nortel than most analysts, he is running to catch up with investors.
Since Nortel hit a 52-week low of 67¢, the stock has nearly quadrupled to $2.53, including an 9% gain yesterday of 22¢ on the Toronto Stock Exchange -- its highest price since July 7.
Mr. Wilson said he issued an "outperform" rating in the summer based on the idea that Nortel was worthy of a US$2 target price, based on its franchise value if you believe it is not going bankrupt.
"Our view is that you are paying for a franchise that is not going bankrupt, and you are paying for something that will be profitable in 2004, 2005 or 2006," he said.
Yesterday's close in New York was US$1.60.
Mr. Wilson said the only reason Nortel would not be an "outperform" is if you think sales will tumble by 20% to 30% in 2003, and if the company is not headed in the right direction in terms of gross margins, structure and profit targets.
Despite the signs of optimism, there are plenty of analysts still firmly on the fence. Many of them are waiting for signs that the sharp decline in capital spending by carriers is coming to an end. This may not happen in 2003 because U.S. telecom spending is expected to drop by 14% next year, and possibly more if U.S. wireless carriers consolidate.
Michael Urlocker, an analyst with UBS Warburg, said there are three issues that need to be addressed before his firm will upgrade its long-time "hold" rating on Nortel.
"One is evidence of the ability to return to profits, two is evidence of stabilization for capital spending by phone companies, and three is evidence that Nortel's risk in planning for growth based on wireless, specifically 3G wireless, is not going to blow up," he said.
Unless Nortel dramatically reduces costs, Mr. Urlocker said that UBS does not expect Nortel to be profitable until at least 2005.
Mr. Urlocker's caution about Nortel is shared by Yorkton Securities Inc.'s Chris Umiastowski. In a research note issued earlier this month, he reiterated his "underweight" recommendation.
"We believe a survival scenario is nearly fully priced into the stock at this time. We prefer to avoid this stock, given the prevailing uncertainty and lack of stabilization in capital spending on the part of carriers," he wrote.
Mr. Umiastowski's rating is based on the assumption that capital spending by carriers will decline to 14% of revenue in 2003. (Traditionally, capital spending by carriers has been 20% of revenue). He said this means that Nortel's quarterly sales could drop to US$2.2-billion, which could lead to more restructuring.
"Assuming survival, we believe Nortel has earnings power of up to US10¢ per share in 2005. We continue to believe Nortel is more likely to survive than not, but this is highly dependent on the telecommunications industry seeing stability in capital spending. Should capex [capital expenditures] fall below our projections, the risk of a financial restructuring for Nortel will significantly increase."
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The latest analyst to clamber back on the bandwagon is Canaccord Capital's Nick Majendie, who yesterday came out with an "overweight" recommendation and a 24-month stock price target of $3.90.
Mr. Majendie's optimism is based on his view that Nortel will be profitable by the second quarter of next year -- meeting the goal that Nortel chief executive Frank Dunn has been advocating for several months.
Mr. Majendie is also looking for Nortel's gross margins to improve to the mid-40% range from 38% in the third quarter, following the sale of the company's optical components business.
This gross margin target represents a return to the record highs when Nortel's optical business was booming.
If these assumptions materialize, Mr. Majendie said, it will not take long for investors to pick up on the Nortel story.
Investors are hungry for positive news, he said, pointing to the performance of Telus Corp. shares after the telecom carrier started to talk about improved cash flow in 2003.
"My take is that if the Street gets any sense of confidence [Nortel] can make money or break even by mid-year next, the stock will be $4 in a heartbeat," he said.
Mr. Majendie's "overweight" rating and expectation that Nortel can have a profitable quarter in 2003 puts him in lightly tread territory. In the past three months, the only other analysts to have a rating above "market perform" or "hold" are RBC Capital Markets' John Wilson and Dresdner Kleinwort Wass' Ariane Mahler, who left the investment firm recently.
Mr. Majendie is comfortable with his against-the-grain approach. "When you are running money, you often do best when you are slightly against the others," he said.
"We have made a lot of money in Telus this year by going against the grain."
It should be noted that while Mr. Majendie is more enthusiastic about Nortel than most analysts, he is running to catch up with investors.
Since Nortel hit a 52-week low of 67¢, the stock has nearly quadrupled to $2.53, including an 9% gain yesterday of 22¢ on the Toronto Stock Exchange -- its highest price since July 7.
Mr. Wilson said he issued an "outperform" rating in the summer based on the idea that Nortel was worthy of a US$2 target price, based on its franchise value if you believe it is not going bankrupt.
"Our view is that you are paying for a franchise that is not going bankrupt, and you are paying for something that will be profitable in 2004, 2005 or 2006," he said.
Yesterday's close in New York was US$1.60.
Mr. Wilson said the only reason Nortel would not be an "outperform" is if you think sales will tumble by 20% to 30% in 2003, and if the company is not headed in the right direction in terms of gross margins, structure and profit targets.
Despite the signs of optimism, there are plenty of analysts still firmly on the fence. Many of them are waiting for signs that the sharp decline in capital spending by carriers is coming to an end. This may not happen in 2003 because U.S. telecom spending is expected to drop by 14% next year, and possibly more if U.S. wireless carriers consolidate.
Michael Urlocker, an analyst with UBS Warburg, said there are three issues that need to be addressed before his firm will upgrade its long-time "hold" rating on Nortel.
"One is evidence of the ability to return to profits, two is evidence of stabilization for capital spending by phone companies, and three is evidence that Nortel's risk in planning for growth based on wireless, specifically 3G wireless, is not going to blow up," he said.
Unless Nortel dramatically reduces costs, Mr. Urlocker said that UBS does not expect Nortel to be profitable until at least 2005.
Mr. Urlocker's caution about Nortel is shared by Yorkton Securities Inc.'s Chris Umiastowski. In a research note issued earlier this month, he reiterated his "underweight" recommendation.
"We believe a survival scenario is nearly fully priced into the stock at this time. We prefer to avoid this stock, given the prevailing uncertainty and lack of stabilization in capital spending on the part of carriers," he wrote.
Mr. Umiastowski's rating is based on the assumption that capital spending by carriers will decline to 14% of revenue in 2003. (Traditionally, capital spending by carriers has been 20% of revenue). He said this means that Nortel's quarterly sales could drop to US$2.2-billion, which could lead to more restructuring.
"Assuming survival, we believe Nortel has earnings power of up to US10¢ per share in 2005. We continue to believe Nortel is more likely to survive than not, but this is highly dependent on the telecommunications industry seeing stability in capital spending. Should capex [capital expenditures] fall below our projections, the risk of a financial restructuring for Nortel will significantly increase."
--文学城www.wenxuecity.com--更多精彩文章及讨论，请光临枫下论坛 rolia.net