Credit Suisse Highlights Near-Term Challenges for Nokia Corp (ADR) (NOK) But Remains Confident on Long-Term

Following Nokia Corp (ADR) (NYSE:NOK) issuing its financial and strategic outlook for its forthcoming presentation at the Capital Markets Day conference, Credit Suisse analyst Kulbinder Garcha reiterates an Outperform rating on NOK while tweaking the price target down from $5.50 to $5.35, which represents just under a 30% increase from where the shares last closed.

For 2017, the analyst has tweaked 2017 EPS down by 2c to €0.22 and 2018 EPS down by 1c to €0.33, with 2016 projections remaining the same, attributed to a decline in EBIT in Networks coupled with a rise in interest expenses and steeper P&L tax rate in 2017. Yet, the cash tax rate maintains at its lesser level.

The analyst comments, “We acknowledge that demand environment remains challenging in Q4 and most of 2017, but we expect top-line to start stabilizing from late 2017/early 2018 as we see capacity constraints in developed markets, LTE coverage expanding in EMs, and 5G trials in select markets.”

Additionally, though Garcha recognizes, “An area of some investor disappointment yesterday was Networks EBIT margin guidance of 8- 10% for 2017, along with incremental cash outlays relating to restructuring and swap outs,” top-line margins are anticipated to rebound “beyond” 2017, with corporate expecting a recovery in the range of up to 10 to 15%.

From the analyst’s perspective, moving forward, patents indicate that there are “clear opportunities ahead,” but reminds us that patience is an important virtue when it comes to investing in shares of the telecom giant.

In the grand scheme of things, when considering the company in the context of fellow telecom giant and NOK competitor Ericsson, moving forward, “While timing remains uncertain, given Ericsson’s recent success in renewing deals makes us confident of LT opportunity,” Garcha concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Kulbinder Garcha is ranked #266 out of 4,226 analysts. Garcha has a 60% success rate and garners 7.0% in his yearly returns. However, when recommending NOK, Garcha loses 14.8% in average profits on the stock.

TipRanks analytics exhibit NOK as a Buy. Based on 9 analysts polled in the last 3 months, 5 rate a Buy on NOK, 3 maintain a Hold, while 1 issues a Sell. The 12-month price target stands at $5.48, marking a 33% upside from where the stock is currently trading.


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