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.
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