IS ALU A BUY HERE?

**Update 8/1 Sold into open, feel stock may try and fill lower end of gap....broke even. $3.50 SHOULD be good support.


from seeking alpha: http://seekingalpha.com/article/283021-top-buy-and-sell-ideas-based-on-thursday-s-biggest-losers?source=yahoo

"The S&P 500 ($SPX) and the broader Russell 3000 ($RUA) dropped 0.3% on Thursday, July 28th, 2011. Of the 4,600 stocks that were tracked, the top 25 losers that closed above $1 at market-close on July 28th and fell 10% or more were analyzed to determine if they would continue going down, or if they would reverse their moves going forward. The following are the best buy and sell ideas based on that analysis:

Buy Alcatel-Lucent ADS (ALU): ALU, the telecommunications giant, is the result of a 2006 merger between France-based Alcatel and U.S.-based Lucent Technologies. It operates in over 130 countries worldwide, and is a leading provider of telecommunications equipment and services to fixed line, wireless, and internet service providers. It is also the world leader in ADSL1 equipment. ALU shares were down 20.4% on Thursday, and they are up 32.1% YTD.

The company reported that in the June 2011 quarter, they swung to a profit of 5c, beating analyst estimates of 2c. Revenue, however, came in under at $5.67 billion versus the $5.73 billion estimate, and the company confirmed that it would meet its fiscal year targets. ALU trades at a forward 7-8 P/E, at the bottom of its historic range, and also at a steep discount when compared to most of its peers, including JDS Uniphase Corp. (JDSU) that trades at a forward 12 P/E, Tellabs Inc. (TLAB) that trades at a forward 100+ P/E, Numerex Corp. (NMRX) that trades at a forward 17 P/E, Cisco Systems Inc. (CSCO) that trades at a forward 10 P/E, and others. The entire sector was driven lower yesterday due to continuing concerns over the macro-economy and its impacts on enterprise spending as well cuts in government budgets and spending, and also concerns that network investment by telecom service providers may be slowing down.

We believe that while concerns over the economy and carrier spending may be valid, ALU maybe the best value in the sector, trading at a historically low P/E and at a steep discount to its peers, while executing a turnaround and projecting earnings rising from 10c loss in 2010 to 28c profit in 2011 and rising to 51c profit in 2012. The stock continues to trade at lows, down almost 80% from its 2004 high, and is currently in free fall along with the rest of the networking stocks.

We would wait for it to bottom and buy in stages so as to take advantage of any further weakness. The stock has firm support in the $3.50s, so the downside appears limited whereas the upside is high in the long-term as the company continues its turnaround, increasing revenues at a modest pace along with rapid earnings growth. It seems that analysts would agree with us, as they have a mean target of $7.26, with a high of $10, well above current $4.01 price; and of the 15 analysts that cover the company, nine rate it at buy/strong buy, four at hold, and one each rate it at underperform and sell."

I bought some this AM, I think its in that GAP FILL RANGE though at higher limits. HUGE amount of volume on th down day, I am hoping that wrung out majority of weak hands.

D