The analyst firm downgraded the Finnish phone maker to "underperform" from its previous "market perform" due to the stock's current valuation. The firm still sees $7 as a fair price for Nokia's stock. Nokia gained 5.8% in the past month, and a total of 72.7% in the past year. It hit a 52-week high of$8.20 on Jan. 10, 2014.
Recent rumors point to Nokia releasing a phone running a version of Google's (GOOG) Android operating system in the near future. This is despite the company selling its handset division to Microsoft (MSFT) in a deal that is expected to close in the next few months.
TheStreet Ratings team rates NOKIA CORP as a Hold with a ratings score of C. The team has this to say about its recommendation:
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"We rate NOKIA CORP (NOK) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 88.23% and other important driving factors, this stock has surged by 114.66% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 88.3% when compared to the same quarter one year prior, rising from -$1,276.81 million to -$149.37 million.
- NOKIA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NOKIA CORP reported poor results of -$1.10 versus -$0.41 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$1.10).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Communications Equipment industry and the overall market, NOKIA CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, NOK maintains a poor quick ratio of 0.92, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: NOK Ratings Report