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It Just Cut Nokia Estimates, But Oppenheimer Still Recommends Going Long

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In a report published Friday, Oppenheimer analysts maintained a Neutral rating on Nokia Corporation (NYSE: NOK), with a price target of $9, while expressing concern regarding the mounting competitive pressures for the company.

In the report Oppenheimer noted, "Nokia surprised investors last quarter with negative commentary pointing to aggressive pricing action from market leaders Ericsson (NASDAQ: ERIC) and Huawei. While management was optimistic that these pressures are likely temporary in nature, our checks suggest otherwise."

There is a slowdown in large LTE deployments in higher margin countries, such as Japan, the US and Korea. Moreover, Ericsson and Huawei are seeking to gain market share and expand their scale at the cost of Nokia and Alcatel Lucent SA (NYSE: ALU), ahead of merger synergies. Also, LatAm carrier consolidation has resulted in a loss of business for Huawei, forcing the company to become aggressive in other regions.

"We expect the pressures to likely last until the acquisition of Alcatel Lucent (2016E completion). Through this time we expect Ericsson/Huawei to remain aggressive and look for opportunities to attack Nokia/Alcatel's footprint," the analysts wrote.

The EPS estimates for 2015 and 2016 have been reduced from $0.26 to $0.21 and from $0.28 to $0.21, respectively.

"Although our view is increasingly bearish, we see an upcoming resolution of IP arbitration with Samsung as downside protection. We would recommend that investors stay long NOK, yet avoid adding new positions in/around earnings, when we believe disappointment is increasingly likely," the report added.

Latest Ratings for NOK

DateFirmActionFromTo
Jan 2017NatixisUpgradesNeutralBuy
Jan 2017Canaccord GenuityDowngradesBuyHold
Nov 2016BMO CapitalDowngradesOutperformMarket Perform

View More Analyst Ratings for NOK
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Posted-In: OppenheimerAnalyst Color Reiteration Analyst Ratings

 

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