Tellabs, Inc.
(NDAQ: TLAB) has seen a lot of action recently ahead of its earnings
announcement this week and continued speculation that it could be a
buyout target. The telecommunications and technology company recently
hit a 52-week low of $5.09, which is well off of its highs around $13
per share. However, unusual call option volume triggered a rebound in
the stock price that has many investors now bullish on this troubled
stock.
Last week, Tellabs saw nearly 10,000 call options traded, compared
to only 1,753 puts and average daily volume of 1,350 contracts. There
was a similar story on Friday with 15,200 call options traded and the
trend has only continued into this week. This activity caused a
noticeable rebound in the stock price that now sits closer to $6 per
share – nearly 20% off of its 52-week lows.
Some of this movement is attributed to a new rumor that Nokia may be
interested in acquiring the company. In the past, valuations for such
buyout of TLAB have been pegged at $9 or $10 per share. There was also
talk of a “rich offer” made by Nokia in the past, although they would
not confirm this fact to the public. However, the Wall Street Journal’s
commentary confirms that the talk was indeed out there and making
rounds. Clearly, any such offer would be a windfall for shareholders at
these prices.
Other analysts attribute the rise to key indicators that earnings
may be better than expected. Verizon recently reported that slowing
economic growth was not curbing its sales and that it would spend $23
billion over seven years to build out a fiber-based network that offers
TV and faster Internet speeds for home users. This is great news for
Tellabs, which is a leading provider of fiber-optical products for
Verizon. Tellabs has a product that benefits directly from these trends.
In the end, there is clearly reason to be excited with Tellabs. The
idea of a buyout is still just that – an idea. However, the company
appears to be well positioned to take advantage of growing trends in
the fiber-optics market. Combined, these factors make TLAB a stock
worth watching!
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