In a note released Monday, Morgan Stanley analyst Francois Meunier upgraded shares of Alcatel Lucent (NYSE: ALU) from Equal-weight to Overweight.
Meunier noted that despite the belief that the company will not be able to hit its €7 billion target for core revenues, he is "increasingly convinced" that it will be able to hit 12.5 percent EBIT margins due to "portfolio pruning" and cost reductions.
Meunier added that he believes Alcatel Lucent's share price has been hurt by solid results of its peers. However, he sees this as a "classic case" of overreaction due to "midway jitters" in a restructuring plan.
Finally, Meunier warned that because, in his view, Alcatel Lucent behaves like a momentum stock, it could prove to be volatile until the company posts its third quarter results as there are no obvious catalyst before then.
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