Canaccord Remains Sidelined on Nokia (ADR) (NOK) Despite Strong 2Q Results

Nokia Oyj (ADR) (NYSE:NOK) shares are climbing nearly 3% in Thursday’s trading session, after the network equipment maker reported solid second-quarter results, with in-line revenues and better margins and EPS.

However, Canaccord analyst Michael Walkley remains sidelined on NOK, reiterating a Hold rating as the stock is trading at a fair value relative to the analyst’s price target of $7.00. (To watch Walkley’s track record, click here)

Walkley commented, “Despite the challenging macro likely to persist through 2018, we remain encouraged Nokia management has executed on its cost-reduction targets and believe Nokia is well positioned to execute on its margin targets and cost reduction targets. We believe Nokia management has a strong track record of operational excellence and will continue its strong execution on cost cutting. Further, we believe the technology licensing business can also create a source of high-margin growth longer term, given our belief the recent deals with Apple, Samsung and Xiaomi should help Nokia reach deals with Chinese OEMs longer term.”

“North American performance remains inconsistent, with Q2 Network revenue weaker than our expectations as carrier competition and M&A concerns dampened near-term spending. We also believe the network equipment swaps ramp in 2H/2017, and we believe this is partially why Nokia management provided commentary regarding an increased risk to its forecasts in 2017 due to uncertainty regarding the timing and acceptance of certain products. However, we view the fact Nokia maintained its full year operating guidance and still anticipates its sales will decline in line with its industry view as a positive signal Nokia will execute in 2H/2017 against these large projects,” the analyst continued.

Out of the 8 analysts polled (in the past 3 months), 5 rate Nokia stock a Hold, while 3 rate the stock a Buy. With a return potential of 9%, the stock’s consensus target price stands at $6.95.


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