Nokia Corporation (ADR) (NOK) PT Raised By Evercore


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Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has finally exited its handset business. Evercore Equity Research analysts Mark McKechnie and Zachary Amsel said in a research note that they have raised the price target from $7 to $8, though the research firm maintains its Equal Weight rating on the stock. Evercore estimates Nokia’s long-term EPS to reach $0.50, assuming €12.6 billion revenue from NSN with 12% operating margin, €1.2 billion revenues from Advanced Technologies, and €1 billion revenue from HERE maps.

Nokia now in a better position to negotiate IP deals

Evercore values Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s networks business at $14.5 billion and HERE unit at $400 million. Putting a valuation on Advanced Technologies is a bit tricky. Nokia has stated that after the Microsoft Corporation (NASDAQ:MSFT) deal, it aims to achieve a royalty run rate of €600 million. McKechnie and Amsel estimate that Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) pay Nokia about €170 million in royalties. And that’s included in the €600 million run rate.

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is negotiating with the Korean electronics giant for a better payment. Evercore estimates that a 0.35% “adder” to the current rate will increase the royalties payment by €305 million to take the total to more than €900 million. After exiting its handset business, Nokia won’t have cross-licensing constraints. So, the company is in a position to renegotiate existing agreements. Analysts estimate that the non-Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) could be upped by 0.25%. It represents about €230 million in incremental sales from renegotiations.

Nokia’s Advanced Technologies unit valued at $5 billion

Based on the long-term opportunity for Advanced Technologies, Evercore values the unit at around $5 billion. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has more than 4,000 patents for infrastructure and 10,000 patents for handsets. Thanks to the Finnish company’s participation in 2G, 3G and 4G roll-out, its patents have significant value. However, the company’s future IP position would slow considerably as it exits the handset business.

Evercore’s $8 price target is reached with $2.72 per share in cash, $3.80 per share for NSN, $0.11 a share for HERE and $1.45 a share for Advanced Technologies.

Nokia SOTP

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) shares gained 0.81% to $7.49 at 3:50 PM EDT on Wednesday.