Alcatel-Lucent boosted by Credit Suisse ratings upgrade
Alcatel-Lucent's shares jumped on the news that Credit Suisse had upped its "underperform" rating to "neutral."
This upgrade, according to Credit Suisse analyst Achal Sultania, is largely a reaction to Alcatel-Lucent securing access to €6 billion of debt financing, which should provide the company with enough cash to get through at least 2015, according to Forbes.
While this funding is not a surprise, the key to the upturn in the vendor's share price, says Forbes, is that the company appears to be viable at least until 2015.
Sultania also notes that the company has recently provided "significant and incremental disclosures" around sales and gross margins for its product portfolios. For 2013, he now forecasts revenue of €14.6 billion, up 1 per cent from 2012, and above his previous target of €14.1 billion, with an operating margin of 0.6 per cent, up from a previously projected 0.5 per cent. For 2014, he believes revenues will climb another 1 per cent to €14.8 billion, with operating margins also improving to 2 per cent.
"Although we expect the company to burn cash in 2013/2014, starting to generate cash in 2015, we still believe that it will be able to maintain gross cash of [€4 billion this year, €3.3 billion next year and €2.3 billion in 2015], thereby creating a viable business entity long term," Sultania wrote in a research note, adding that asset sales could provide additional cash.
Other analysts have also followed Sultania's upgrade of the company. Investment analysts at AlphaValue have placed a "buy" rating on the stock, and currently have a €2 target price on the company's shares. Sultania has lifted his target price for Alcatel-Lucent's stock from €0.70 to €1.25.
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