Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: Eric L who wrote (17134)	12/6/2001 10:15:40 AM
From: elmatador	Respond to of 34857

"Among the stocks Merrill cited as possibly overvalued were Nokia, currently selling for about $24. Under Merrill's conservative 2003 scenario, Nokia earns a price target of only $3; under the optimistic scenario its target would be $15, well short of its current valuation. Among the other equipment stocks Merrill sees as possibly overvalued include Ericsson, Qualcomm, Tellabs and Motorola." Telecommunications - Don't Buy Equipment Stocks Yet > Forbes.com, Dec 04, 2001, 12:50 PM ET > NEW YORK - Telecom equipment stocks have been buoyant of late, and they're rising again today. Investors are encouraged by the huge sums Cingular Wireless is spending on its new network and by the cautious optimism Cisco Systems is expected to deliver today at its conference with Wall Street analysts. > Don't get too excited. The equipment stocks may be up today, but the service provider stocks are down, which is emblematic of the basic problem facing many of these equipment firms: Much of their growth depends upon increased capital spending by the carriers, which may not deliver. > It's always notable when a major Wall Street firm throws cold water on a rally, and that's just what Merrill Lynch did recently with its report, "Capital Punishment for Communications Equipment Stocks." Merrill's team of analysts noted that before the "bubble years" of 1999-2000> , telecom carriers usually increased capital spending by about 7% per year. That suggests that post-bubble spending growth could be relatively modest through 2003, even under the most optimistic scenario. > "Using these hypothetical 2003 views, we compare the current valuation multiples based on that rough forecast and compare it to the historic and trough valuation multiples to establish a price range objective," the analysts wrote. Their analysis "suggests that many of our stocks have now run to levels that can only be justified by the most optimistic scenarios. Moreover, if our conservative 2003 estimates turn out to be true, many of our stocks could be considered overvalued." > Among the stocks Merrill cited as possibly overvalued were Nokia, currently selling for about $24. Under Merrill's conservative 2003 scenario, Nokia earns a price target of only $3; under the optimistic scenario its target would be $15, well short of its current valuation. > Among the other equipment stocks Merrill sees as possibly overvalued include Ericsson, Qualcomm, Tellabs and Motorola. > Cisco is among those seen as a wild card. It currently sells for about $20. Under Merrill's optimistic scenario, it might soon justify a $30 valuation; under the conservative scenario its price target would be only $10. > Stocks such as Cisco that are less dependent upon the service providers may have more upside potential. But the equipment firms that lean more heavily on the carriers have less chance of a strong rebound by 2003, according to Merrill's analysts. If they are correct, then telecom investors who have been banking on a quick recovery in capital spending are being way too optimistic. When they figure that out, the current rally could come to an abrupt end.