In the wake of yet another restatement at Nortel, UBS Securities analyst Robert Dennison has raised his target price to $3.50 from $3.25 while still maintaining his “neutral 2” rating. The rationale? Dennison believes Nortel’s revenue (excluding the joint venture with LG) will rise 2% in 2006 and mid-single digits in 2007 at a time when it will implement a cost-cutting and restructuring program. As a result, Dennison believes Nortel’s operating margins could climb. Meanwhile, Desjardins Securities’ Paul Howbold downgraded Nortel to “hold-above risk” from “buy-above-average risk” due to “greater uncertainty surrounding Nortel’s earnings”. CIBC World Markets’ Steve Kamman, who rates Nortel a “sector perform”, said there seems to be light at the end of the tunnel. “While some open issues remain, we see decent visibility to 20 to 25 cents fully-taxed. He also speculates Nortel could make some acquisitions this year, citing Redback, Tellabs, 3Com and Enterasys as possible targets. For a wrap-up of analyst thoughts, check out a story from Reuters.
UBS Upgrades Target Price; Desjardins Downgrades NT