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.

More from Technology

Intel CEO Brian Krzanich Steps Down: Here Are Some of His Biggest Moves

Intel CEO Brian Krzanich Steps Down: Here Are Some of His Biggest Moves

Will Porsche's Electric Car Push Take Down Tesla?

Will Porsche's Electric Car Push Take Down Tesla?

Intel CEO Out After Past Relationship With Staffer - Why Stock Is Now in Play

Intel CEO Out After Past Relationship With Staffer - Why Stock Is Now in Play

Jim Cramer on Micron: Listen to the Conference Call

Jim Cramer on Micron: Listen to the Conference Call

Jim Cramer: Disney Has Much More Staying Power Worldwide Than Netflix

Jim Cramer: Disney Has Much More Staying Power Worldwide Than Netflix