Nokia Is Simply 'Too Cheap' At Current Prices, Says Nordea Analyst

Nordea’s Martin Nilsson believes that the current stock valuation of communications and telecom equipment manufacturer Nokia Corp (ADR) NOK does not reflect the possibility of the company performing in-line with expectations. The analyst upgraded the rating for the company from Hold to Buy, while raising the price target from €5.6 to €6.

Nokia’s Attractive Valuation

Analyst Martin Nilsson estimated the earnings power of the new company including Nokia and Alcatel Lucent SA (ADR) ALU at €4 per share. He wrote, “Coupled with the upcoming cash return – a EUR 0.25 DPS in June, the start of a buyback programme equivalent to another EUR 0.25 per share and still excess cash – we find the valuation too attractive to ignore despite the challenging market conditions and cuts to consensus.”

Nilsson expects Nokia’s proposed €0.25 total dividend per share to be approved at the AGM in June. The company is also expected to initiate its €1.5 billion share buyback program besides distributing an additional dividend of €0.4-€0.5 per share.

Although Nokia’s 1Q organic revenues are likely to decline by as much as 10 percent y/y, especially due to a difficult comp quarter in old Nokia, the top-line trends are likely to improve thereafter.

“Furthermore, we do expect to see gradual improvements in the top-line trend throughout the year, with a 5% organic revenue decline for full-year 2016E,” Nilsson stated.