Analysts from Deutsche Bank and Nomura Holdings recently weighed in on Finnish telecom giant Nokia Corporation (ADR) (NYSE:NOK) and software giant Microsoft Corporation (NASDAQ:MSFT), following in-line Q4:15 earnings and a data suggesting slowing PC growth, respectively.
Nokia Corporation (ADR)
Following earnings earlier this month, Deutsche Bank analyst Johannes Schallerare weighed in on the stock, highlighting a compelling entry point for shares. The analyst believes the company is doing well in light of the “the macro-back drop.” The company posted revenues of 3.6 billion Euros, compared to estimates 3.88 billion Euros, and earnings of 0.15 Euros per share, compared to estimates of 0.12 Euros per share. While Q4:15 earnings were in line with analyst expectations, Alcatel Lucent “surprised on the upside, led by fixed and wireless access.” However, he cites caution on the lack of 2016 guidance from both Nokia and Alcatel Lucent and predicts a 7% decline in wireless capex. He also notes competition in “emerging LTE markets,” specifically with companies Huawei and ZTE. Despite some challenges, the analyst believes “growth in optics, routing, IMS and small cells” will keep the company on track for growth.
Schallerare comments on the recent merger of Nokia and Alcatel Lucent, stating that “the stage is now set for rapid execution of the integration plan” and notes that various “cross selling opportunities” may start immediately. He also expects more detail in the next earning report regarding the restructuring plans, something that he believes will build investor confidence.
Like many others, Schallerare was disappointed regarding the arbitration ruling between Nokia and Samsung. However, he is bullish on an upcoming Apple patent deal in 2017, believing this will help Nokia reach revenues of 1.5 billion euros by 2019.
The analyst reiterates his Buy rating on the company and decreases his price target from 7.40 euros to 6.80 euros.
Johannes Schallerare has a 25% success rate recommending stocks with an average loss of 30.3% per recommendation. According to TipRanks’ statistics, out of the 10 analysts who have rated the company in the past 3 months, 7 gave a Buy rating while 3 remain on the sidelines. The average 12-month price target for the stock is $9.60, marking a 60% upside from where shares last closed.
Analyst Frederick Grieb of Nomura Holdings recently weighed in on Microsoft after recent data from Taiwan shows that ODMs (original design manufactures), which stated that monthly PC growth slowed by 38% in January of 2016, marking a steeper deceleration than the two previous years. The analyst believes this data represents a lower than expected PC growth rate for CY1Q16.
The analyst states a general correlation between PC ODM and Windows OEM (original equipment manufacturer) revenue growth rates, though “multiple factors may skew this correlation,” which may result in better quarterly windows OEM growth. First, the analyst believes that ODM units will represent only “~40- 45% of total PC volumes in 2016,” having a less meaningful effect on overall PC sales. Second, the analyst states that ODM units are more “heavily biased towards emerging markets than overall units” where software piracy has more of a significant impact on the company’s revenue. Third, quarterly shifts in ASP “create variance between Microsoft revenue growth and ODM / PC growth.” Lastly, channel differences between “sell in” and “sell through” result in “an additional delta between the PC growth numbers…and Windows OEM revenue growth.”
Grieb believes the company “should see a slight benefit from ASPs in the March quarter” versus early 2015. Relative to his estimates, the analyst states that last quarter’s spare inventory levels may also have an unfavorable effect on Windows OEM for the March 2016 quarter. The analyst maintains his OEM revenue estimates despite the January ODM results.
The analyst reiterates his Buy rating on the stock with a $65 price target. He explains, “We are positive on the stock as we believe the transition to Office 365 is trending ahead of plan, declines in the Windows business are likely to moderate over the course of CY2016, and we expect the company to continue to outperform on the operating expense side of the business.” Frederick Grieb has a 39% success rate recommending stocks with an average return of 9.6% per recommendation.
According to TipRanks’ statistics, out of the 20 analysts who have rated the company in the past 3 months, 14 gave a Buy rating, 2 gave a Sell rating, and 4 remain on the sidelines. The average 12-month price target for the stock is $58.665, marking a 13% upside from where shares last closed.