Alcatel-Lucent (ALU) May Begin Upward March, But Overhangs Remain - Barron's
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Alcatel-Lucent (NYSE: ALU) shares are trading lower Wednesday following a two-notch downgrade by Jefferies earlier in the session.
But that just means a better buying opportunity, according to Barron's.
Barron's notes bulls on the company expected a tour de force rebound from Alcatel in the telecom business. Alcatel is said to have jumped back into the second spot, just behind Cisco (Nasdaq: CSCO), as largest provider of networking equipment. The company has also risen as a maker of 4G wireless communications systems.
Despite all the gains, shares trade where they were two years ago, making it incredibly cheap. Some say shares should be at $5 each, about 70 percent better than it's current price.
Bears argue the company hasn't reported a profit since the 2006 merger of Alcatel and Lucent Technologies, despite constantly reporting $16 to $17 billion per year in sales. Barron's notes the company missed critical upgrade cycles, forcing customers into makers of more cutting-edge equipment.
Falling abut 40 percent since its last quarterly earnings report in July, the next quarter may not be much better. EPS is forecast at 7 cents, while revs are expected to be $5.7 billion when Alcatel reports on November 4th. Some also believe it will be tough for the company to meet 5 percent margin expectations.
Disposition of Alcatel's enterprise business may be essential, but also challenging. Enterprise handles Alcatel's call-center software as well. Last week, reports suggested Alcatel could strike a deal with Gensys to sell the unit for $1.5 billion, though no word has emerged from either company yet.
Closing of the deal would be a catalyst for Alcatel to move higher, while putting some cash on the balance sheet.
That said, many analysts are more focused on longer-term results, meaning there are still a few things left to be worked out before upward momentum is reached.
Alcatel shares are down 5 percent Wednesday morning.
But that just means a better buying opportunity, according to Barron's.
Barron's notes bulls on the company expected a tour de force rebound from Alcatel in the telecom business. Alcatel is said to have jumped back into the second spot, just behind Cisco (Nasdaq: CSCO), as largest provider of networking equipment. The company has also risen as a maker of 4G wireless communications systems.
Despite all the gains, shares trade where they were two years ago, making it incredibly cheap. Some say shares should be at $5 each, about 70 percent better than it's current price.
Bears argue the company hasn't reported a profit since the 2006 merger of Alcatel and Lucent Technologies, despite constantly reporting $16 to $17 billion per year in sales. Barron's notes the company missed critical upgrade cycles, forcing customers into makers of more cutting-edge equipment.
Falling abut 40 percent since its last quarterly earnings report in July, the next quarter may not be much better. EPS is forecast at 7 cents, while revs are expected to be $5.7 billion when Alcatel reports on November 4th. Some also believe it will be tough for the company to meet 5 percent margin expectations.
Disposition of Alcatel's enterprise business may be essential, but also challenging. Enterprise handles Alcatel's call-center software as well. Last week, reports suggested Alcatel could strike a deal with Gensys to sell the unit for $1.5 billion, though no word has emerged from either company yet.
Closing of the deal would be a catalyst for Alcatel to move higher, while putting some cash on the balance sheet.
That said, many analysts are more focused on longer-term results, meaning there are still a few things left to be worked out before upward momentum is reached.
Alcatel shares are down 5 percent Wednesday morning.
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