Canaccord top analyst Michael Walkley has gone from bullish to sidelined on Nokia Corp (ADR) (NYSE:NOK) amid a short-term he sees rife with challenges, from a tough macro spending atmosphere coupled with the telecom giant’s reignited patent war against Apple Inc. (NASDAQ:AAPL) about licensing agreements. As such, the analyst has removed high-margin Apple licensing revenue from his Technologies division projections for both this year as well as for 2018.
With a flurry of obstacles and a brewing legal scuffle weighing overhead, the analyst downgrades from a Buy to a Hold rating on shares of NOK while reducing the price target from $5.50 to $5.00, which implies a just under 6% upside from where the stock is currently trading.
Walkley explains, “While we believe Nokia is well-positioned for strong market share gains as the wireless industry transitions to 5G technologies, we do not anticipate meaningful 5G carrier investments until 2019 and an ongoing challenging macro spending environment through 2018.”
However, the analyst still sees silver lining from the sidelines, noting, “Despite the challenging macro leading to our lowered revenue estimates, we believe Nokia management will maintain strong execution on reducing costs to achieve operating margin targets provided at its analyst day. We believe Nokia management has a strong track record of operational excellence and will continue its strong execution on cost-cutting initiatives following the Alcatel Lucent acquisition.”
“Further, we believe the technology licensing business can also create a source of high margin growth longer-term but the Apple renegotiation could take more than a year and create a challenging 2017 in terms of Technologies division revenue,” Walkley surmises.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Michael Walkley has achieved a high ranking of #36 out of 4,351 analysts. Walkley upholds a 63% success rate and gains 15.2% in his annual returns. When recommending NOK, Walkley loses 8.2% in average profits on the stock.
TipRanks analytics exhibit NOK as a Buy. Out of 9 analysts polled by TipRanks in the last 3 months, 4 are bullish on Nokia stock, 4 remain sidelined, and 1 is bearish on the stock. With a return potential of nearly 5%, the stock’s consensus target price stands at $4.93.