Goldman's Duval Believes Nokia Has 51% Upside

• Shares of Nokia Corporation (ADR) NOK have risen 3.66 percent over the last five trading days.
• Alexander Duval of Goldman Sachs has maintained a Buy rating on the company, while lowering the price target from €9.00 to €8.70.
• Despite Nokia’s year to date underperformance in the EU tech universe, Duval believes that the stock offers 51 percent return potential.

The stock has underperformed Goldman Sach’s EU tech universe by 18 percent, year to date, which is likely to be indicate of an “overly bearish” outlook on the wireless segment, caution regarding the proposed deal with Alcatel Lucent SA (ADR) ALU and concerns regarding big patent delays.

“By contrast, we see scope for margin improvement given industry consolidation, while Nokia should have a competitive advantage… given its converged portfolio,” Duval stated, while adding, “Nokia’s management has a strong track record in cost control, underpinning our confidence in its synergy target.”

Duval also expects meaningful capital returns following the deal with Alcatel Lucent. The offer period for the proposed deal is expected to open in late 2015 and close in early 2016. In addition, Nokia is expected to achieve EBIT margin of 9.7 percent in the Networks business in 2015.

Also, there appears to be “longer-term improvement potential given industry consolidation, more rational pricing, and continued effective cost control,” according to the Goldman Sachs report.

Duval believes that one of the company’s patent arbitrations would be resolved in the next few months, while there is likely to be “longer-term upside from improved patent monetization.”