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On Friday, Bloomberg announced that Telefonica (NYSE:TEF) is poised to award Alcatel-Lucent (NYSE:ALU) an order to build a nationwide high-speed wireless network. This announcement resulted in yet another day of gains for ALU; bringing its YTD gains to 57%. Alcatel-Lucent has been one of the better performing under-the-radar stocks of 2012. The company is trading with its best fundamentals of the last five years yet is trading with a one year loss of more than 50%, which leads me to believe it's nowhere near resistance, and is on path to posting much larger gains.

The Telefonica announcement has been in the works for several months, ever since Alcatel-Lucent began testing its LTE network in Madrid and Barcelona for businesses and corporations in the third quarter of 2011. Telefonica is the largest phone company in Spain but has lost customers due to its less efficient network and the increased demand for data. The news that Telefonica is poised to award ALU is good for both companies. It shows that despite a troubled European economy phone companies recognize the need to capitalize on a growing demand for new technology such as ALU's 4G LTE network. As a result this could mean more European tasks for Alcatel-Lucent; a company that is heavily reliant on U.S. companies such as AT&T (NYSE:T), Verizon (NYSE:VZ). The market has welcomed the Telefonica news and ALU has responded with a 4% gain to add to its 27% gain since the company announced earnings one week prior.

Since Alcatel-Lucent announced earnings there has been a slew of updates to create even more optimism among investors. In addition to the news regarding Telefonica, there are reports that Sprint (NYSE:S) will utilize Alcatel-Lucent to further expand its network. The company also announced that it's expanding the lightRadio Wi-Fi ecosystem; which will make it easy for smartphones, tablets, and other connected devices to move easily between networks and hotspots. Overall, there has been significant developments surrounding ALU over the last few months to suggest a larger platform, better technology, and higher profits for years to come.

The most significant news of 2012 has been the company's most recent earnings report. Since announcing quarterly results the stock has returned 27% which was driven by earnings of $0.25 compared to expectations of $0.07. ALU was the hardest hit during the last 6 months of 2011, losing over 70% of its value, which is more than companies such as Juniper (NYSE:JNPR) and Ericsson (NASDAQ:ERIC) which both missed expectations while ALU beat by a substantial margin . The company also announced that it will be offering access to its worldwide portfolio of 29,000 patents through a licensing syndicate.

Alcatel-Lucent finished 2011 with a one year loss of 50% despite posting its first year of profit since the trans-Atlantic merger in 2006. The continuous years of loss, over the last 5 years, has resulted in ALU losing 85% of its value since 2006. However, with the company returning to profit, offering its patents for additional revenue, and forming new partnerships with companies such as Telefonica, Chunghwa Telecom (NYSE:CHT), and Sprint it appears the upside has never been brighter.

I have been particularly bullish on ALU for the last year, but even more since the stock was trading under $1.75. There is simply no reason that this stock should be trading this cheap. Over the last month I have written a series of articles covering ALU which include: identifying ALU as the stock with the second most upside in 2012; identifying ALU as the best stock in the communications equipment industry based on fundamentals and stock metrics; and finally comparing ALU to Cisco (NASDAQ:CSCO) to show how unbelievably cheap ALU is trading. Therefore, it is safe to say that I believe ALU will trade higher and that it would make a great long-term investment.

ALU just posted its first year of profitability in over 5 years and is trading with an upside that appears brighter than ever; however some investors are wondering if ALU has immediate upside because of its YTD gains. A stock's immediate upside is very difficult to predict and since I am not an investor that relies on technical analysis I am not the best to answer this question. But in my opinion, both the immediate and long-term upside is among the best in the market. It's one of very few companies that is trading at just 7x earnings with a price/sales of 0.25. Most stocks with trading metrics such as this are companies with falling fundamentals but ALU does not fit into this class of investments. Its upside and fundamentals are improving and the stock has traded higher based on the fact that it's undervalued, not because of momentum.

ALU has returned 57% so far in 2012 but I believe that it's far from reaching any level of resistance. The stock lost 75% of its value during the last 6 months of 2011 which was a result of fear that its fundamentals may decline because of a struggling European economy. Alcatel-Lucent has not only proven this fear to be incorrect but it's exceeding all expectations and forming partnerships and making decisions to produce both immediate and long-term growth. It's hard to say what the immediate upside potential of ALU may be; however if it were worth $6.50 in April of 2011 then I find it difficult to believe that it's not worth more today. ALU's loss during the last 6 months of 2011 was a result of speculation, but now that the speculation has been proven to be incorrect, it's time for ALU to appreciate, and post gains that have not been seen in many years.

Disclosure: I am long ALU, S.