Morgan Stanley Resumes Coverage on Alcatal Lucent

In a report published Thursday, Morgan Stanley analyst Francois Meunier resumed coverage on Alcatal Lucent SA (NYSE: ALU) at Overweight, with a €3.70 PT.

According to the report, a new €1bn net cash position alleviates balance sheet concerns. While shares no longer remain in value territory at 0.85x EV/Sales, it is expected market share momentum to continue in wireless and routers, and potential execution on the disposal portion of the shift plan as a catalyst.

“The markets for telecom infrastructure now appear more benign in Europe, where Alcatel has a strong presence in fixed,” the report said “In addition, Alcatel has won new contracts with Sprint, China Mobile and China Telecom. The company's expansion into Routing represents further opportunity for market share, with Alcatel now the main challenger to Cisco and Juniper in the core router and datacenter market.”

Some risks to the price target include potential inertia on restructuring US capex recover might be temporary and industry dynamics on pricing remain competitive.

ALU closed Wednesday at $46.1 with shares trading up at 1.54 percent.