ALA - new high
Market Scan
Alcatel's Momentum Continues To Build
Kate DuBose Tomassi, 03.22.06, 1:35 PM ET
Banc of America Securities analyst Tim Long upgraded shares of Alcatel to "buy" from "neutral," citing improved product traction, potential margin upside, and an "attractive" valuation on newly raised numbers.
The analyst also raised the price target on Alcatel (nyse: ALA - news - people ) shares to $18 from $14.
Long is forecasting 10% growth in 2006 and 9% growth in 2007 for Alcatel's wireline segment.
"We expect that strong sales growth from IP routing, optical, and DLSAM should outpace declines in legacy systems. IP routing momentum should also result in further multiple expansion for the stock," he said.
Specifically, in IP routing, AT&T (nyse: T - news - people ), BT Group (nyse: BT - news - people ), Deutsche Telekom (nyse: DT - news - people ) and France Telecom (nyse: FTE - news - people ) are among about 120 customers that have chosen Alcatel for its solutions, said Long.
In optical, the company is the industry leader with 15% of market share, said the analyst. "Given its dominant market position in Europe and emerging markets and moderate growth in optical spending, we believe that Alcatel should continue to garner decent sales."
Long also said he expects Alcatel to continue to build momentum into 2006 in its Digital Subscriber Line Access Multiplexer business, in which the company has been gaining market share since the March quarter of 2005.
For the company's wireless mobility business, the analyst estimated growth of 13% in 2006 and 10% in 2007, citing strength in subscriber growth in emerging markets.
The analyst raised fiscal 2006 and 2007 earnings estimates to 83 cents and 95 cents per share, respectively, from 76 cents and 86 cents per share, "based on momentum across products."
The firm's top picks in its coverage of data networking and wireline equipment are Nokia (nyse: NOK - news - people ) and Qualcomm (nasdaq: QCOM - news - people ), both rated "buy" with respective price targets of $21 and $54. The firm's least favorites are Ciena (nasdaq: CIEN - news - people ) and Lucent Technologies (nyse: LU - news - people ), both rated "neutral" with $2.50 price targets.
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Alcatel Gains Squeeze Juniper
By Scott Moritz
Senior Writer
3/22/2006 12:08 PM EST
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Juniper's (JNPR:Nasdaq - commentary - research - Cramer's Take) fan base keeps shrinking as growth opportunities seem to slip away.
Banc of America analyst Tim Long downgraded the stock Wednesday to neutral from buy. Long says the networker's failure to gain market share in its routing business and its "choppy" sales of network security products could make for weaker-than-expected sales this year.
Though the Sunnyvale, Calif., Internet equipment supplier has long been a Wall Street favorite for its strong No. 2 position in router sales behind Cisco (CSCO:Nasdaq - commentary - research - Cramer's Take), 2006 has been a tough year. The stock has dropped 14% amid management turmoil and increasing success by rival Alcatel (ALA:NYSE ADR - commentary - research - Cramer's Take) on Juniper's turf.
Juniper appears particularly vulnerable in the emerging Internet video market, says Long. The company's routers -- boxes that direct Internet traffic -- are "weak" in gigabit Ethernet capacity, he says. Meanwhile, Juniper's "lack of video expertise" will make it hard to offer gear supporting the "triple play" -- phone, Net and TV -- that phone and cable companies are shopping for.
At the same time, rival Alcatel has been racking up new customers and bigger sales in this edge routing market, where new generation boxes handle varying types of network traffic. "We believe the success of Alcatel highlights the importance of offering a complete solution," Long indicates.
The gains of rivals became glaringly apparent back in January, when Juniper guided its profit outlook lower for the first and second quarters. The warning took Juniper's shares down 19% in a single day, and they have since recovered less than half that decline.
Particularly galling to investors was that Juniper in January guided toward its first sequential sales decline in four years. Calling for a 1% revenue decline in the current quarter from fourth-quarter levels, Juniper effectively called the end to the runaway success of the company's Internet gear.
The weak comments came just two weeks after three executives took their leave of Juniper. The company's worldwide sales chief, Jim Dolce, stepped down along with infrastructure head Carol Mills and applications leader Jef Graham.
Juniper shares fell 29 cents to $19.07 in late-morning trading Wednesday.
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