As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.
Today, I'll look at Alcatel-Lucent (NYSE: ALU). The telecommunications equipment company wasn't able to fully recover in 2012, as conditions in the industry remained weak. But toward the end of the year, things started looking up for the company. Below, you'll learn more about Alcatel-Lucent's prospects for 2013.
Stats on Alcatel-Lucent
|
Average Stock Target Price |
$1.32 |
|
Full-Year 2012 EPS Estimate |
($0.18) |
|
Full-Year 2013 EPS Estimate |
($0.07) |
|
Full-Year 2012 Sales Growth Estimate |
(13.8%) |
|
Full-Year 2013 Sales Growth Estimate |
(2.1%) |
|
Forward P/E |
NM |
Source: Yahoo Finance. NM = not meaningful due to negative earnings estimates.
Will Alcatel-Lucent finally bounce back in 2013?
Analysts aren't optimistic about Alcatel's prospects in the coming year. With a target share price that's more than 15% below where the stock trades currently, Wall Street seems convinced that tough times will continue, even as Alcatel should be able to narrow its losses in 2013.
The big reason that Alcatel has generated some optimism coming into 2013 is the fact that it got a credit facility from Credit Suisse and Goldman Sachs. By allowing the company to refinance its debt, Alcatel bought some much-needed time to try to get itself in better shape. Yet given that its restructuring needs not only the chance to cut costs but also a strategic vision for the future, the real challenge for the company will be to overcome weak capital spending by its customers and deal with competition from other industry players.
In order to get things turned around now that the company's balance sheet is in better shape (at least for the short-term), CEO Ben Verwaayen thinks Alcatel will need to boost research and development spending as well as grow its margins. By seeking to milk more money from its patents by working with patent-management firm RPX, Alcatel could improve margins somewhat. Moreover, more deals like last summer's agreement with Sprint to install Alcatel small-cell equipment in densely populated areas to boost capacity could inspire more customers to work with the company.
Looking ahead, even those who believe in the stock's long-term prospects expect tough times during 2013. Alcatel-Lucent remains a gamble, but it's one that has a huge potential payoff if the company can find a way to survive and grow in a tough environment for telecom equipment makers.
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