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Nokia Corporation Message Board

  • j.nixon10 j.nixon10 Jan 25, 2013 8:16 AM Flag

    Needham Upgrade-BUY-$7.50 price

    Needham & Co.’s Charlie Wolf this afternoon raised his rating on shares of Nokia (NOK) to Buy from Hold, witha $7.30 price target, or €5.50 for the ordinary shares traded in Helsinki (NOK1V), following a Q4 report this morning that was in line with Nokia’s pre-announcement two weeks ago.

    Nokia shares were under pressure today, dropping 38 cents, or over 8%, to close at $4.26, after the company said it would not issue a dividend, in order to preserve “flexibility” in its finances. The ordinary shares fell 5.5% to €3.30.

    Although Nokia’s reported sales of its Lumia line of smartphones running Microsoft’s (MSFT) Windows Phone 8 came in lower than he expected, at 4.4 million units, versus his 5.6 million estimate, Wolf writes that the “shortfall appears to be more a result of limited
    supply than disappointing demand.”

    “There were reports throughout the quarter that the high-end Lumia 920 was sold out on most carriers offering.”

    Wolf thinks that a rise in average selling price for the Lumia, along with improvement in gross margin, could lead to dramatic financial improvement for Nokia this year, even if unit growth trails the smartphone market, leaving aside the state of the other parts of the business, such as the telecom equipment join venture Nokia-Siemens Networks (NSN) join venture:

    Nokia sells the Lumia 920 at an unlocked price of 338 Euros, the Lumia 820 at an unlocked price of 300 Euros, the Lumia 710 at an unlocked price of 225 Euros and the Lumia 610 at an unlocked price of 169 Euros. Assuming equal sales of all four models, the average price of Lumia phones could rise to 258 Euros. According to iSupply, the bill of materials cost (BOM) of the Lumia 920 is 163 Euros. Using this cost as our benchmark, we can compute the costs of the other three models, as shown in Figure 2. With the addition of other non-BOM costs equal to 35% of BOM costs, the gross margin on the 920 equals 34.9%.1 It’s reasonable to assume that the gross margins on lower priced Lumias are less than this. If we assume an equal weighting of the different Lumias sold, the average gross margin equals 30.9%. We suspect that Lumia 920s make up the bulk of current sales. But that should change as lower priced Lumia models invade emerging markets [...] The prospect that the average price on Lumia smartphone sales could rise to 250 Euros by the fourth quarter of 2013, up from 186 Euros in the fourth quarter of 2012, and that the gross margin on these sales could approach 30%, up from 18% in the fourth quarter of 2012. We’re forecasting only 17% smartphone unit shipment growth in 2013, which is about half the forecasted growth in the smartphone market. But this translates into 65% revenue growth because of the rising average selling price. Our 2013 forecast of the financial performance of mobile devices, location and commerce services and Nokia Siemens Networks remains subdued.

    Wolf is modeling shipments of 40.8 million “smart devices” this year, in Nokia’s parlance, which would be up from 35.1 million last year.

    Wolf raised his estimate for this year to €35.2 billion in revenue and 16.6% gross margin, with 35 Euro cents EPS from a prior €33.5 billion, 10.3%, and 25 Euro cents.

    That is substantially better than the average Street estimate for €29.87 billion and a 15-cent loss per share.

    As for NSN, Wolf thinks the 13.8% operating margin in the division, a recovery after years of struggling to reach profit, was a “fluke.” However, he also isn’t counting on sustained profit in NSN:

    There’s no better way to create value than to return to consistent profitability for Nokia Siemens Network, which appears likely going forward. However, our upgrade neither assumes outstanding results or a sale in 2013.

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    • Vlad is correct. Right now, 9 out of 10 analysts have a sell or strong sell equivalent rating on NOK. It's only a matter of time before a few analysts upgrade.

      The industry's weakness is in it's "follow the pack" mentality among analysts. The'd rather be wrong, but with the crowd, than the only one on the 'right' side. Keeps their jobs safe.

      Once a few leaders up their NOK ratings, the rest of the herd will follow, for fear of being left behind.

    • It's beginning. There's over analysts like this guy who had a sell or strong sell rating. One by one they'll upgrade which will create huge momentum.
      Like I said last week - Goldman et al, the media, the shorts, etc cannot fudge the numbers cause the numbers are there and they're real.

      This is why Goldman has now gone to a buy from a SELL and that dimwit, Cramer, went to a buy from a - "what, Nokia was a repeated basher sell from my firm, no way, Nokia should have never gone that low." Lol, Cramer can't even upgrade it cause he's too humiliated that he downgraded Nokia repeatedly just to watch it go up nearly 200% during his downgrade brashest tirade.

      You can't look more uninformed and stupid than that.

      What a Cramer!

      The sell off should be done - I truly expect to see upgrade after upgrade coming in now based in higher margins forecasts, big sales in china and profitability for the entire 2013.

      Sentiment: Strong Buy

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