re: Merrill Lynch Likes Wireless, Nokia
Steven Milunovich called Nokia's cash-flow generation "almost unrivaled in the industry."
>> Merrill Cuts Internet-Sector Weighting, Ups Wireless View
Riva Richmond
Dow Jones Business News
December 30, 2002
Merrill Lynch & Co. (MER) advised technology investors to decrease Internet-company holdings and add weight to wireless-sector investments, citing signs of shifting earnings-growth trends.
In a research note Monday, Merrill's Steven Milunovich said his TechStrat model suggests Internet-sector earnings growth is turning negative and stock- price momentum is weakening. In downgrading the group to "equal weight" from " overweight," he also argued expensive valuations make "the sector vulnerable."
Meanwhile, earnings growth appears to be turning positive for wireless communications companies, Mr. Milunovich said, citing European wireless analyst Adnaan Ahmad's bullish forecast for handset shipments. Mr. Ahmad predicts 474 million handsets will ship in 2003, compared to a consensus expectation of 435 million.
Merrill's top wireless pick is Nokia Corp., with a "buy" rating. It rates Qualcomm Inc. (NasdaqNM:QCOM) and Motorola Inc. (NYSE:MOT) "neutral." All three stocks are considered highly volatile by the firm.
Merrill expects to receive or intends to seek investment banking business from all three companies in the next three months. It was a manager in the most recent public offering of Motorola securities, has received compensation from it for banking services in the last year and owns 1% or more of the company's stock.
Mr. Milunovich predicted that upward revisions to Nokia's earnings expectations elsewhere on Wall Street will bring consensus views closer to Merrill's prediction, which calls for a return to revenue and earnings growth after two years of stagnation. He called Nokia's cash-flow generation "almost unrivaled in the industry."
Merrill's technology sector weighting advice favors wireless, hardware and services companies. Those sectors have overweight ratings, while Internet, storage and software have "equal weight" ratings and chips, communications- equipment and supply-chain sectors have "underweight" ratings. <<
- Eric - |
