Nokia Corporation (ADR) (NYSE:NOK) (BIT: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 (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) will be an entirely new company. Microsoft Corporation (NASDAQ:MSFT) 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 (NYSE:NOK) (BIT: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 (NYSE:NOK) (BIT: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 (NYSE:NOK) (BIT: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.

Tags: