Is Nortel still a buy?
Following Nortel's disappointing third quarter numbers, some analysts downgraded their outlook on the company. But that negative view of Nortel's future share price is by no means unanimous.
First the downgrades. UBS Warburg cut its 12-month price target on Nortel from $115 US to $60 US. Nortel was trading on the NYSE at $46 US, down 27 per cent or $17.31on Wednesday in late-afternoon trading.
UBS also said that shares of Nortel could fall to $40 US in the short term given the uncertainty.
Lehman Brothers cut its rating from "buy" to "outperform," and shaved the company's 12-month stock price target from $100 US to $55 US.
And Chase H&Q downgraded its Nortel recommendation from "strong buy" to "buy."
Some analysts upbeat about Nortel
Canada's biggest investment bank, RBC Dominion Securities, held on to its $100 US price target for Nortel.
In Nortel's earnings report, revenues came in about $300 million US weaker than expected. RBC said the shortfall was a short term blip for the quarter, and it did not change its forecast for Nortel through 2001.
Dave Powers, an analyst at Edward Jones, told Newsworld Business News that the problem was that Nortel's stock was "priced for perfection". He said Nortel is still a "very solid company with strong fundamentals." Powers upgraded Nortel to a "buy".
Fred Ketchen of ScotiaMcLeod told Newsworld Business News he would expect the company's shares to rebound once "common sense" returns. He said Nortel stock would likely return to $85 CDN to $100 in the short term. Ketchen's advice: be patient.
TD Securities reiterated its "buy" rating on Nortel, although it lowered its revenue target for the company by four per cent this year, and three per cent in 2001.
Scotia Capital and CIBC World Markets also held on to a fairly bullish outlook for Nortel, saying that its core business continues to be solid.
Merrill Lynch reiterated its "near-term buy" and "long-term buy" rating on the stock.
Erik Gustafson, portfolio manager of the Liberty Growth Stock Fund in the U.S., told U.S. financial channel CNBC that the sell-off was totally due to momentum players. He is recommending Nortel as a buy, and said he might be adding to his fund's already considerable stake in Nortel.
And Alex Henderson, an analyst at Salomon Smith Barney maintained his $120 US price target on the stock. He said investors shouldn't panic and said it makes sense to keep Nortel as a core holding.