Nortel's Not Worth the Price, Analyst Says

RBC Capital drops its rating on the telecom-equipment maker, citing valuation.
By TSC Staff ,

Shares of Canadian telecom-equipment maker

Nortel

(NT)

were lower in premarket trading Tuesday after an analyst said the company's shares have become overpriced.

RBC Capital downgraded Nortel to sector perform from outperform based on the stock's valuation. Shares of Nortel slipped 4 cents to $2.99 in Instinet action before the opening bell.

In a research note Tuesday, RBC said the stock price has risen to a level that indicates investors are beginning to be too optimistic about the outlook for global capital spending on equipment through 2004.

The firm has a price target of $3 on the stock.

The downgrade struck a similar chord to a research report

issued last week on Nortel competitor

Lucent

(LU)

. On Friday, Merrill Lynch cut its rating on Lucent to neutral from buy, based on the stock's valuation and saying the shares have exceeded its $2.50 price target.

In addition, Merrill said it didn't expect any improvement in the sector in the intermediate term.

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