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Shares of Nokia
NOK are rallying on the heels of an earlier upgrade from analysts at Credit Suisse led by Kulbinder Garcha. The firm increased the investment rating on Nokia from Neutral to Outperform and boosted the price target from €4.80 to €6.
The upgrade was partly related to an updated sum-of-the-parts analysis by Garcha and the other Credit Suisse analysts. "dated our SOTP analysis
for Nokia, and we now see upside to €6.0 at least. In particular, we believe
Nokia's transformative deal with Microsoft allows it to drive significant value
creation from its vast patent portfolio, which we believe is applicable to the
whole CE industry," according to Garcha.
The analyst sees Nokia's licensing deals worth at least €2.30 per share given the following three factors.
- deals "with a number of key players
in the industry over the last few years (Apple, Qualcomm and BlackBerry)
serve as a proof point as to the strength of the company's IPR. Additionally,
we believe it can grow its annual royalty run-rate of €500mn by a further
40% pursuing licensing agreements with currently unlicensed handset
vendors."
- "Second, 90% of Nokia's patents today are unlicensed and we believe its IPR, especially in areas such as chipsets and OS, can be applied not only to the handset market but also to the wider CE market."
- "Third, the strategic importance of Nokia's IPR also makes this an acquisition target potentially for Qualcomm, Intel, Apple, Huawei, Google, Ericsson, Samsung or a consortium of tech companies, driving a higher take-out value."
Garcha sees €1.60 per share related to excess distributable cash.
On the NYSE, shares of Nokia are trading up more than 5 percent to around $6.60.
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