Next Stop for Alcatel-Lucent: $3?

Things may finally be starting to look up for Alcatel-Lucent (NYSE: ALU  ) .

The Paris-based provider of networking and communications equipment scored a juicy deal with China Mobile (NYSE: CHL  ) and an even more encouraging analyst nod from Raymond James this week.

China Mobile -- China's largest wireless carrier with a whopping 693 million customers -- awarded Alcatel-Lucent a healthy chunk of its new 4G trial network rollout. The move inspired Raymond James analyst Simon Leopold to stick to his outperform rating, but he's also offering a fat $3 price target on the stock.

That may not seem like a lot, but keep in mind that Alcatel-Lucent hit an all-time low of $0.91 just last week!

Cynics will argue that Alcatel-Lucent is trading this low for a reason. It began the year by posting unexpected back-to-back quarterly deficits. Analysts see a small loss when it reports its third-quarter results in two weeks. Revenue has fallen this year, weighed down by weakness in Alcatel-Lucent's home turf of Europe and even a slowdown in China. However, even skeptical analysts see the company resuming its profitable ways in the quarter that began this month.

And, yes, there are plenty of unsold analysts out there. Goldman Sachs downgraded the stock earlier this month, and just three of the dozen analysts tracked by Thomson/First Call have Alcatel-Lucent listed as a buy.

Is that so bad? It's actually a blessing for contrarian investors that can accept the company's shortcomings with the thesis that Alcatel-Lucent's prospects will improve as the global economy gets back on track.

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Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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