Nortel's Upside Potential

Nortel Networks doomed? Why then the 35% rally on Nov. 13? Maybe some people think Nortel has a future – or at least that its shares will be more readily embraced when the global flight from risky assets attenuates?

The market rallied just over 5% that day, so the tech “dinosaur” beat the market close to seven times. Some of Nortel’s leap might have been due to a contract win with Verizon Business announced Nov. 13, but the dramatic uptick likely was mostly due to market conditions and should provide some idea of the potential for gains once markets rally off their bottoms. If we get just a modest 15% rebound across the board within the next few months, Nortel (NT) could be 30% to 100% higher.

The most oversold stocks tend to lead the climb off the bottom, according to technical analysts. Nortel certainly fits the description of heavily oversold. So maybe there could be, despite the thick-as-molasses pessimism, some dramatic upside for Nortel shares over the next few months?

Nortel may or may not go to zero eventually, as some prophesize. In the meantime, though, traders, with nerves of steel might be well rewarded. Once again a caveat: as you may recall from this post, I am a long-suffering holder of Nortel shares.

Comments

[bamanomical:]

ditto the long suffering Nortel shareholder bit. Will someone get the bureaucrats off their butts at this company and start some good old fashioned selling.

2008 Nov 16 10:40 AM

[MarvinMBA:]

Nortel practically destroyed itself with its false financial reporting and and lawsuits resulting in fines and loss of market support. If you look at the earnings today per share you have to wonder where the growth is going to come from especially going into a worldwide slowdown. Is Nortel ready for a second 10 to 1 reverse split??? I would rate this stock as not an opportunity but a danger...MarvinMBA

2008 Nov 16 10:57 AM

[Red Green:]

"Dramatic uptick"? "Rally"? What are you smoking? Did you happen to notice that the price of this company is 56 cents a share? I couldn't buy a candy bar for that. Maybe the upticks will level off and just be steady--steady and sure, that's the ticket. Many more of these "dramatic upticks" and I will be an emotional wreck. Nortel is like the tortoise and the hare--with Nortel being the tortoise. It may keep upticking and get back to where it once was--if I was a tortoise maybe I would live long enough to see it. But for the short term, I think I am consigned to watching a bunch of empty suits stumbling around in the dark.

2008 Nov 16 12:35 PM

[User 299670:]

this is a no branier. Tax forwarding losses and a large chunk of debt owned by the canadian government..yep... betcha diddn't know that..this will never fail but will be blended into a company that is making money like cisco/avaya/siemans and they would not have to pay tax for a very very long time..stock is worth zero but worth 5.00 per share if structured correctly on a merge or referse take over.

2008 Nov 17 08:49 AM

[Red Green:]

I once worked for a bank that took over another with tax losses and debt and the same argument you make. For a brief time it was good but the bank that was taken over is no more and was completely obliterated. The one that took over the other is in trouble today--one of the very largest in the U.S. I would love to see Nortel work out in a way that stockholders and employees are not hurt--but that is not likely and tax gimmicks work for a few--not the many.


On Nov 17 08:49 AM User 299670 wrote:

> this is a no branier. Tax forwarding losses and a large chunk of
> debt owned by the canadian government..yep... betcha diddn't know
> that..this will never fail but will be blended into a company that
> is making money like cisco/avaya/siemans and they would not have
> to pay tax for a very very long time..stock is worth zero but worth
> 5.00 per share if structured correctly on a merge or referse take
> over.

2008 Nov 17 10:39 AM

[W.A.:]

I worked for Nortel for just over 22 years before getting laid off during the dot com melt down in 2001. Nortel's main failing is extremely bad management. Over the last seven years the lousy management team has let the hard workers and those who they see as a threat go to maintain their positions. I give Nortel at most a year before they're in receivership. The real losers in all this are the retirees. Their pensions and medical benefits are going to be severly impacted by all this.

2008 Nov 18 05:38 AM