Nokia Corporation (ADR) (NOK) Upgraded, Price Target Raised To $10

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Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s intellectual property has been a hot topic on Wall Street, and the debate continues about just how much it could be worth. Michael Walkley and his team at Canaccord Genuity hosted an investor meeting with Nokia Chief IP Officer Paul Melin at the Mobile World Congress last year. Because of the increased value of the patent portfolio, they have raised their price target and upgraded Nokia.

Nokia guides on licensing revenue

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) guided for a €600 million quarterly run rate after Microsoft Corporation (NASDAQ:MSFT) completes the purchase of its devices division. The Canaccord Genuity team believes that this includes conservative assumptions for Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and that it will increase materially in the long term.

They’re expecting the ruling in the case with Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) to be handed out in 2015. They also expect Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) to put in place new initiatives for monetizing patents and providing high-margin growth opportunities for the longer term. In addition, they see further potential upside from Nokia’s upcoming licensing negotiations with Apple Inc. (NASDAQ:AAPL), which are expected exiting 2016.

Looking ahead into Nokia’s licensing future

After the meeting at the Mobile World Congress, Walkley said they believe Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s patent portfolio is strong and estimate that about a third of the company’s patents are related to connectivity. They believe another third is related to device hardware technologies like the camera and other features and that the last third is related to device user interface, software and services.

They believe that most of Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s licensing revenue comes from standard essential patents for LTE, WCDMA, GSM and other connectivity technology. They see more licensing opportunities from the NSN patents because they have not yet been included in any of Nokia’s previous licensing deals.

Nokia valued at $10 a share

The analysts updated their sum of the parts model to indicate that Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is worth $10 a share. They note that after Microsoft Corporation (NASDAQ:MSFT)’s purchase of Nokia’s devices division, the company will have about €7.7 billion in net cash. Because of how NSN’s results have improved materially over the last couple of years, the Canaccord Genuity team sees it as “a sustainably profitable business,” so they have assigned a value of .9 times sales on their estimated 2015 revenue of €11.4 billion, which is about €10.5 billion. They estimate Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s patents value at about €9 billion and its HERE maps business at about €1.5 billion.

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