Alcatel-Lucent SA (ALU) and Autodesk, Inc. (ADSK) had received positive upgrades from analysts recently. In this article, both stocks will be analyzed fundamentally and technically. Investing strategies will also be reviewed.
Alcatel-Lucent is a leading innovator in the field of networking and communications technology, products and services. ALU was up 2.92% and closed at $1.41 on March 1, 2013. ALU had been trading in the range of $0.91-$2.48 in the past 52 weeks. ALU has a market cap of $3.20B with a high beta of 2.37.
On March 1, 2013, Bernstein upgraded ALU from Underperform to Market Perform with a price target of $1.46 (from $0.79). Analysts have a mean target price of $1.39 with a median target price of $1.40 for ALU. Analysts, on average, are estimating an EPS of $-0.11 with revenue of $4.25B for the current quarter ending in March, 2013. For 2013, analysts are projecting an EPS of $-0.13 with revenue of $18.67B, which is 2.00% less than 2012.
There are a few positive factors for ALU:
- Stronger ROE of 36.3 (vs. the industry average of 10.1)
- ALU has a total cash of $6.38B with a total debt of $6.23B. ALU has a book value of $1.10 per share (vs. the current trading price of $1.41)
Technically, the MACD (12, 26, 9) is showing a bearish trend, but the MACD difference continues to converge. The momentum indicator, RSI (14), is picking up but still indicates a bearish lean at 39.64. ALU is trading between its 50-day MA of $1.56 and 200-day MA of $1.32, as seen from the chart below.
How to Invest
In the short term, it is important to see if ALU can hold above its 200-day MA to determine its near-term direction. For bullish investors, a credit put option spread of June 22, 2013 $1.00/$1.50 put can be reviewed, which will allow investors to gain some upside credit premium or allow investors to acquire ALU stock at a price near $1.25-$1.30.
Autodesk, Inc. is a leader in 3D design, engineering and entertainment software. ADSK was up 1.74% and closed at $37.36 on March 1, 2013. ADSK had been trading in the range of $27.70-$42.69 in the past 52 weeks. ADSK has a market cap of $8.35B with a high beta of 2.12.
On March 1, 2013, Jefferies upgraded ADSK from Hold to Buy with a price target of $45.00 (from $40.00). The firm commented,
"We upgrade ADSK to Buy based on: i) Increased conviction of a non-residential real estate cycle over the next 12-18 months plus ADSK's high sales correlation to this (R²=0.74); ii) ADSK's strong position in BIM with room for increased penetration in intl markets/ construction; iii) Model setup that is attractive under a cycle scenario; and iv) a valuation that is ok given our view on the cycle/ shift to higher recurring rev."
Analysts have a mean target price of $41.10 and a median target price of $42.00 for ADSK. Analysts, on average, are estimating an EPS of $0.45 with revenue of $583.81M for the quarter ending in April, 2013. For 2013, analysts are predicting an EPS of $2.11 with revenue of $2.45B, which is 5.80% higher than 2012.
There are a few positive factors for ADSK:
- Lower P/E, P/B, and P/S of 34.7, 4.1, and 3.7 (vs. the industry average of 35.2, 4.4, an 3.8)
- ADSK generates an operating cash flow of $559.10M with a levered free cash flow of $266.12M
Technically, the MACD (12, 26, 9) indicator is showing a bearish trend, but the MACD difference continues to converge. RSI (14) is picking up but still indicates a bearish lean at 46.91. ADSK was trading above its 200-day MA of $33.91 and had just closed above its 50-day MA of $37.32 in the last trading day, as seen from the chart below.
How to Invest
For conservative investors, it is suggested to wait until technical indicators, MACD and RSI (14), become neural or turn bullish before establishing the long-term position. It is also important to see if ADSK can hold above its 50-day MA to determine its near-term direction. If ADSK can stabilize above its 50-day MA, a credit put option spread of July 20, 2013 $31/$34 put can be reviewed. Investors can also review the following ETFs to gain exposure to ADSK:
- Cleantech Portfolio (PZD), 3.11% weighting
- S&P North American Technology-Software Index Fund (IGV), 3.08% weighting
Note: All prices are quoted from the closing of March 1, 2013. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.