This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Nokia Corporation (ADR) (NOK): Can It Execute Its Plans?

Nokia Corporation NOK has some great plans, but plans only get you so far.

Nokia Corporation ADR (NOK - Get Report) (NOK1V) HEL:NOK1V is in the midst of an evolution, and what investors must consider right now is whether the company will successfully be able to execute its plans. RBC Capital analysts think the company’s stock could hit $10 a share—but only if it is able to successfully carry out its plans.

Nokia’s plans are good, but…

Analyst Mark Sue notes that by the time the second half of February rolls around, Nokia Corporation (NOK - Get Report) (NOK1V) HEL:NOK1V will be an entirely new company. Microsoft Corporation (MSFT - Get Report) will have purchased its devices and services division, and it will shift its focus to intellectual property and its Here maps. He sees this as a positive because the company continues to have multiple assets, but it has fewer liabilities as well.

Nokia is planning to use the major cash infusion from the sale of its devices business to set up a framework to grow the Advanced Technologies division. The company will then move its vertical mapping assets, which are currently tied to smartphones, into “lateral markets” in the automobile industry and other places as an alternative service to Google Maps. The company will aim to grow its Here business beyond €1 billion, although Sue thinks the company may need more investments in order to find topline growth.

Monetizing Nokia’s patents

At this point Nokia Corporation (NOK - Get Report) (NOK1V) HEL:NOK1V has about 10,000 essential and non-essential patents. About two-thirds of its devices and services patents are expected to still be valid a decade from now. And then when you add the NSN patents to it, which the company has not yet monetized, Sue says this has the potential to add value.

He says investors may want “a simple royalty rate calculation,” but he notes that it is more complicated than that because of how many of the terms are fluid.

Nokia to invest in R&D

Nokia will also have to invest some money into research and development as it grows, protects and leverages its intellectual property. The company has already brought a case against HTC as a way to build precedents, and it is negotiating with Samsung. He notes that Nokia doesn’t want to be seen as a patent troll, but rather as a “technology innovator” which can actually add to the industry rather than just sue the companies which participate in it.

Nokia’s margins pressured, but comfortable

The analyst noted, as others have, that Nokia Corporation (NOK - Get Report) (NOK1V) HEL:NOK1V’s gross margins for NSN could be under pressure as China ramps up the rollout of LTE infrastructure. However, he thinks continual improvements and more of a balance will keep operating margins “at comfortable levels.” He notes that additional coverage at T-Mobile and Sprint could also provide some cushion to gross margins as China builds.

Another area Nokia will be concerned about is its debt rating and cash situation. The company wants to be able to secure a better debt rating while strengthening its balance sheet and still “leaving enough cushion for bolt on acquisitions.” Sue believes the company will stay conservative with the cash it has before it considers any kind of long-term cash returns to shareholders.

Where will Nokia go from here?

He believes Nokia Corporation (NOK - Get Report) (NOK1V) HEL:NOK1V will soon be “an earnings growth story,” noting that this is a new beginning for the company. He says if the company is able to pull everything together, he sees its per-share price going to $10. However, currently his price target is $8 per share. He has an Outperform rating on the stock.

Shares of Nokia fell 2% during the regular trading day at the NASDAQ.

-By Michelle Jones

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
NOK $7.61 -0.13%
MSFT $42.90 3.10%
AAPL $127.60 2.28%
FB $83.09 2.87%
GOOG $535.38 2.16%

Markets

DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs