LU, CNBC, and DLJ: Why I closed my DLJ account.
This story from the CNBC website came out THE SAME DAY McGinn gave his interview. Note how the CNBC reporter dogs LU much the same way Street.com did. Tabloid journalism would be too complimentary for this piece of rubbish.
Please note what the DLJ analyst says about LU. Ive been in comms investing for a long time so I know a BS personal agenda when I see it. But to millions of the mom and pops who sold LU out of their retirement because of these comments, there is NO excuse for this ass's comments. LU is the most stable high tech company available. That's why cysts throw darts at it once in a while, to further their agenda. But this is the last straw. I pulled a half mil out of Pershing and put it in Schwab. Thank you Mr. Buck. And have a nice day, YOU SCHMUCK!!!!!!!!!!!!!!!!!!!!!
Oct 26 1999 12:01PM ET
More on Stock Lab...
Lucent Numbers Don't Tell Entire Story
by Frances Hong
Technology Reporter
"Nortel's optical business has been strong,
and it has gained the psychological edge that
Lucent has since lost."
-- David Heger of A.G. Edwards & Sons
Lucent, the company formerly known as Bell Labs, beat Street
estimates by 2 cents this morning. But despite a strong fourth quarter,
some analysts like Lucent's competition as long-term stock plays.
Lucent Technologies CEO Richard
McGinn was on CNBC's Squawk Box this
morning to talk about the company's Q4
earnings.
Click here to see Part I of the interview.
Click here to see Part II of the interview.
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Player to view video content. Click here to download
It is true that since AT&T Corp. {T} spun off Lucent Technologies
Inc. {LU} in 1996, investors have enjoyed a solid run uphill. But
Lucent's stock stalled this year and the company's most-recent
numbers don't compare strongly with Cisco Systems and Nortel
Networks.
Lucent shares were up 3 3/4 to 63 5/8 at midday. The
communications company said that fourth quarter revenues
increased 23 percent to a record $10.58 billion compared with
$8.6 billion in the year-ago period. Earnings were up 50 percent
over the year-ago quarter to $972 million or 31 cents a share,
excluding charges.
Lucent's Stock Performance Since Going Public
Sounds like good news, so far.
However, Lucent's fourth-quarter revenue growth of 23 percent
pales by comparison with Cisco's 48 percent rise for its
most-recent quarter (Cisco {CSCO} is scheduled to report
earnings on Nov. 9).
And though the Murray Hill, N.J.-based company's gross profit
margins have been steady at just below 50 percent, Cisco gets
more bang for the buck.
Furthermore, the company must contend with up-and-coming
Nortel Networks Corp. {NT}, which has been rapidly winning favor
with investors and Wall Street with its optical-networking
capabilities.
Lucent is increasing earnings at a faster rate than Nortel, but Nortel
is also getting a higher multiple, says analyst David Heger of A.G.
Edwards & Sons. "Nortel's optical business has been strong, and it
has gained the psychological edge that Lucent has since lost," he
adds.
Comparison Chart: LU, CSCO, NT
What's the story behind Lucent's choppy stock performance this
year?
Issues with the company's balance sheet, high inventories, high
accounts receivables, the quality and source of its earnings growth,
and day sales outstanding getting longer. (Tracking DSO reveals if
customers are paying in a timely manner.)
Despite the quarterly sloppiness this year, Heger upgraded the
stock Monday to "buy" from "accumulate," primarily due to
valuation and recent weakness in the stock.
Indeed, relative to where Nortel is trading, Lucent appears
"undervalued," Heger says.
But Donaldson Lufkin & Jenrette's analyst Eric Buck is less
optimistic. "They have overpromised the growth and may be
finding it difficult to meet those targets."
What does Buck, who has a "market perform" rating on the stock
recommend to Lucent investors? "There are better places to be,"
he says.
Technically speaking, shares of Lucent have dipped below their
one-year, 200-day moving average.
Lucent One-Year Performance Chart with Its 200-Day Moving
Average
Lucent's stock experienced some huge selling last week as it
dipped below the trend line, which could mean that the correction
isn't over yet.
I LOVE this part.
"It's clearly not in a strong position, and I would stay away from it,"
says one technical analyst who prefers not to be named. Sounds like Cramer to me!
Despite the lingering clouds over Lucent, CIBC's Martin Pykkonen
says investors have discounted Lucent's growth rate a bit too
much. "As long as we have bandwidth demand, this company won't
go away."
Unfortunately for Lucent, there has been no new catalyst to drive
the stock. And its biggest threat comes from the optical space. "It's
too early to say, but there's enough market potential for all the
players to play together," Pykkonen says.
One key theme for the CIBC analyst is international business. Over
the past year, Lucent's international business has grown 45
percent. Considering its origins under the Bell system, which
focused on domestic business, the company has come a long way.
Domestic business represents a large portion of Lucent's total
business -- somewhere in the low 70 percent range. By
comparison, Nortel's domestic business accounts for 50 percent.
Analysts are looking for more balance and would like to see
international growth from Lucent in the 40 percent range year over
year.
Despite Nortel's current favorable status on the Street, analyst Paul
Sagawa of Sanford C. Bernstein & Co. says he favors Lucent for
the long term based on the simple fact that eventually, earnings
matter.
"Lucent's stock is at a fire-sale price, and all the shorts will be
covering once the fourth-quarter earnings come in," Sagawa says.
Investors beware. The fire still doesn't make Lucent a hot stock. |
