Thursday, August 5, 2010

Telecom Chart: Lazarus Recovery on lower volume

Since I have been closely following the Telecom NZ [TEL.NZ] share price I have wondered how low the share price was going to go and if indeed lows of $1.81 reached just a month ago meant that the stock was oversold.

Well, since then the share price has put on 12% on about half the volume (see 23 month TEL chart above) of the June share price plunge and is currently trading at $2.02. Short termers will be pleased with their current gains and have seen a new trading pattern emerge where opportunities exist for gains of more than 10c. Hard to say what might happen next short term but investors with a 12% gain might consider realising some cash.

Of interest too will be medium term investors who are trying to factor in what the company could be worth if they win a government contract to set up the new fibre network around the country and will be subsequently demerger Telecom into two separate business units, Chorus, their Network company and Telecom Retail, their public face and presence.

The value of the two units will be difficult to assess given no profit or revenue projections for a Chorus with the responsibility to build, run and sell business off the new network but Telecom see profit to be made so medium term the company could be worth a punt.

Long-term my view is avoid unless you have faith in current or future management that they can turn this ship around.

By on weakness for short or medium term returns.

Telecom NZ @ Share Investor

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