Prediction on Alcatel: Under $10 Within 3 Months (ALA)

I am setting a target buy price for Alcatel (ALA) at under $10 in 1-3 months time. ALA’s 52 week low is $11.01.

I wrote about Alcatel when the company first announced its 'merger of equals' with Lucent Technologies (LU). I believe that the merger of Alcatel and Lucent will be mutually beneficial. By consolidating, Alcatel will gain key inroads to the U.S. market and Lucent’s IP portfolio. Lucent will gain key exposure to the European market and better long-term growth prospects.

Alcatel has seen steady declines since announcing its merger with Lucent. I believe there are looming fears over a mid-year spending slowdown in the telecom industry. Lucent has also recently announced declining demand for its wireless networking gear.

I believe ALA is oversold and being dragged down with LU as investors digest the possible long-term implications of Lucent announcement. I expect to see a rebound in ALA and I am setting my target sell price for ALA at $14 in 3-6 months time.

ALA 1-yr chart:

Comments

[Adam:]

Andy, agree with the $10 prediction, but this is a tough one to figure out in the long term. Its easy to claim the headcount/finanical synergies, but Im not sure that the IPR/product/business practices will mesh quickly and this will be a long slow merger resulting in lack luster performance of this company for many years to come.

Frankly, I still wonder why Alcatel did this!

Adam

2006 Jul 13 01:04 PM