With shares of Alcatel-Lucent (NYSE:ALU) trading around $1, is ALU an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Alcatel-Lucent is a France based company that proposes solutions used by service providers, businesses, and governments worldwide to offer voice, data, and video services to their own customers. It is also engaged in mobile, fixed, Internet Protocol and optics technologies, applications and services. The company operates in three business segments: Networks; Software, Services and Solutions and Enterprise. As consumers and businesses continue to connect at an increasing rate, communications companies like Alcatel-Lucent stand to see rising profits. However, the company must adapt to new technologies if they are to see a rising consumer base.
T = Technicals on the Stock Chart are Mixed
Alcatel-Lucent stock has seen lower highs and lower lows over the last several years. Any significant push higher by the stock has been met with increased selling. Currently, the stock is trading near multi-year lows but may be forming a base. The stock has made new all-time highs just about every year and looks to be headed there this year as well. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Alcatel-Lucent is trading around its key averages which signal neutral price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Alcatel-Lucent options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Alcatel-Lucent Options | 42.29% | 0% | 3% |
What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Average | Average |
| July Options | 10 Best Stocks To Buy Right NowAverage | Average |
As of today, there is an average demand from call and put buyers or sellers, neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Decreasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Alcatel-Lucent’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Alcatel-Lucent look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | -203.11% | -423.67% | -171.56% | -342.68% |
| Revenue Growth (Y-O-Y) | -3.14% | 0.94% | -7.32% | -19.53% |
| Earnings Reaction | -1.42% | -7.55% | -9.9% | -2.83% |
Alcatel-Lucent has seen decreasing earnings and revenue figures over the last four quarters. From these figures, the markets have been unhappy with Alcatel-Lucent’s recent earnings announcements.
P = Average Relative Performance Versus Peers and Sector
How has Alcatel-Lucent stock done relative to its peers, Cisco (NASDAQ:CSCO), Ericsson (NASDAQ:ERIC), Nokia (NYSE:NOK), and sector?
| Alcatel-Lucent | Cisco | Ericsson | Nokia | Sector | |
| Year-to-Date Return | 6.12% | 7.26% | 22.57% | -3.54% | 8.39% |
Alcatel-Lucent has been an average relative performer, year-to-date.
Conclusion
Alcatel-Lucent provides communications products and services to consumers and businesses around the world. The stock has suffered over the last few years, however, it may be forming a value base at these prices. Earnings and revenue figures have been decreasing over most of the last four quarters, so, investors have not been too happy. Relative to its peers and sector, Alcatel-Lucent has been an average performer. WAIT AND SEE what Alcatel-Lucent does in coming quarters.
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