In a research report issued yesterday, Goldman Sachs analyst Alexander Duval upgraded shares of Nokia Corp (ADR) (NYSE:NOK) from Hold to Buy rating, while raising his price target to €5.70 (ADRs US$6.30), up from €5.50 based on higher estimates and an unchanged sum-of-the-parts (SOTP) valuation.
Duval wrote, “Nokia is down c.27% YTD, due to the lower-than-expected FY16 Networks margin guide. We see this as a clear buying opportunity for a stock with limited EU macro correlation and a strategic edge from its fixed/wireless offer. First, 2016 SME Direkt consensus Networks EBIT has fallen 21% and 2H consensus margin estimates are low vs history. Second, while 2Q may be weak due to the Alcatel integration, this has already been flagged by Nokia. Third, our analysis leads us to raise our synergies estimates, leaving our adj. 2017/18 EPS estimates 7%/9% ahead of consensus.”
The analyst added, “Nokia is about to enter its most intensive cost-cutting phase and management has historically shown itself adept at delivering efficiencies. We see scope for consensus upgrades mid term (with our 2017/18 EPS 7%/9% ahead). Moreover, we look for data validating our view that Nokia’s position is superior to that of some other wireless players given its solid fixed-line offer and the fact its R&D budget has grown ahead of the 5G transition. Finally, longer term the wireless market may see higher pricing given an improved market structure.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Alexander Duval has a yearly average return of -30.4% and a 44% success rate. Duval has a -11.6% average return when recommending NOK, and is ranked #3730 out of 3990 analysts.