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Alcatel-Lucent SA (NYSE:ALU) and Autodesk, Inc. (NASDAQ: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 SA

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.

(click to enlarge)

Source: StockCharts.com

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.

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.

(click to enlarge)

Source: StockCharts.com

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 (NYSEARCA:PZD), 3.11% weighting
  • S&P North American Technology-Software Index Fund (NYSEARCA: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.

Source: Alcatel-Lucent And Autodesk With Positive Upgrades, And How To Invest