Yes, the price movement in recent weeks has been good to us longs. However, there does not seem to be fundamental news behind the move.
I believe that the $US.43 low had a high degree of bankruptcy fear, with a large dose of shareholder capitulation. So, a bounce off those levels is to be expected, especially with the apparent increased optimism in this space and at Nortel. The low was simply too pessimistic, at a market cap of $1.7b and P/S of about .2.
Nortel must show some solid evidence of tracking their goal of break even/small profit by Q2 03. First step will be no warning/downside suprise this quarter. I guess we'll know in about a month if that first step can be taken.
Analysts who joined the NT bash party (of course, after the stock was already below $5) continue to bash during this move up. To me, this is a bullish sign, as most analysts simply reiterate whatever their previous call was. However, they will eventually be right, in that NT appears to be heading to overpriced territory, until evidence emerges that a true stabilization in their business model is coming.
Possibly a good time to sell covered calls...
Anyone have their own valuation model on NT they'd like to share? |
