In a report published Wednesday, Bank of America analyst Didier Scemama upgraded the rating on Nokia Corporation (NYSE: NOK) from Neutral to Buy, and raised the price target from $6.19 to $7.07 .
In the report, Bank of America noted, “We upgrade Nokia to Buy and increase our revenue and EBIT forecasts for 2014/15 by 5/9% and 32/28%, reflecting a more bullish view on the top line for NSN and Advanced Technologies. The risk profile of new Nokia is very different to the handset-focussed Nokia of old, and we see limited potential downside in our bear case to €4, whilst in our bull case we see c60% potential upside to €6.68. We estimate that new Nokia is capable of €0.35 in earnings power. Our €5.33 [ US$7.07 ] PO is based on an 11x earnings multiple (15% discount to Ericsson's 5yr average, 20% discount to current), to which we add back the excess net cash that we believe could be returned to shareholders (€1.53/share). Our new PO would value Nokia on 0.88x EV/Sales (2015), which we believe is conservative given the 11.8% operating margins we forecast for 2015, vs the current 0.58x EV/sales.”
Well it is good to have some supporting numbers to the call I made right after the deal. I had been saying that the stock was easily worth 6-7 dollars a share without the handset business. An 8 dollar a share price target in a year isn't unreasonable at all.
Sentiment: Strong Buy
Plus, Didier was smart enough to tell people to dump Nokia in 2011. Not sure when he went to neutral. Depending of the timing of the upgrade to neutral, he might be the Nostradamus of Nokia.