The recent selloff in Sierra Wireless Inc. represents a buying opportunity as the "underlying fundamentals [are]strong and the valuation compelling," suggests Scotia Capital's Gus Papageorgiou. He explains that a trading relationship between Sierra and rival Novatel Wireless Inc. recently broke down because of rumours that Sprint is preparing to eliminate Sierra from its retail channel, a Novatel upgrade and overhang from a Sierra equity issue. "None of these reasons really threatens the core investment hypothesis in Sierra, nor diminishes ... the company's competitive position," he writes. While LM Ericsson this week warned of a less robust roll-out of third generation (3G) wireless networks in the U.S., "many investors may be concerned that this will impact Sierra," Mr. Papageorgiou reasons. "Certainly it will have some impact, but ... we believe AT&T will continue to aggressively market Sierra's products, because these data cards are the only real 3G application available and the carriers need them to help capitalize on their 3G investments," he writes. He rates Sierra "outperform," with a $31 price target. The stock has gained 1 per cent to $18.30 on the TSX Wednesday afternoon.
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