Beleaguered Franco-American telecom firm Alcatel-Lucent could gain today after the stock won some positive attention from analysts Merrill Lynch and J.P. Morgan. Merrill boosted its rating on the shares from sell to neutral, stating that there's no longer a valuation case to sustain sell rating. The broker added, At around historical Alcatel trough levels of 0.8 times EV/sales, we think is currently pricing in a 6% to 6.5% long-term operating margin, significantly below management's target of 10%.
Meanwhile, J.P. Morgan initiated coverage of ALU at overweight, setting a EUR7.00 price target for the equity. Morgan said that EUR9B of unactivated tax credits should be valued, and noted that risks are more fully discounted. The broker expects pre-structuring earnings will triple in 2008, with strong optical growth helping to offset weakness in the company's wireless division.
The flurry of positive analyst attention could attract some buyers to ALU, which is currently wallowing near its mid-2003 lows. Prior to this morning's activity, Zacks reported just 2 buys, 9 holds, and 1 sell rating from analysts.