Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is followed by many financial analysts. Consensus analyst earnings estimates have been revised upwards by 4.6% compared to seven weeks ago, according to a report from Screener published on October 11, 2014.
Analysts positive on Nokia
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Nokia Corporation’s improvement in earnings estimates is at least partially due to an improvement in the outlook for the sector. To analyze if the company’s stock is fairly priced, analysts at Screener applied a “Peter Lynch” formula that compares projected earnings growth and dividend with the estimated PE ratio.
Based on this methodology, it is noted that the Finnish company is fundamentally undervalued compared to its theoretical fair price. Its valuation is less attractive compared to the technology sector of Europe. Further, analysts noted that the “Forecasted Growth + Estimated Dividend Yield/ Estimated Price Earnings” ratio is higher than 1.6, revealing that the projected growth is a result of a base effect, which means that the company is in process of turnaround. In this case, estimated PE is a better indicator of a stock’s expected growth than the long-term growth, says the report.
This suggests that the fundamental price outlook for Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is good, even on the account of other stocks in the same industry faring better.
Higher spending on wireless technology
In a separate report dated Sept. 19, 2014, RBC Capital Markets analysts noted that Nokia is transforming into a “cleaner entity” and is targeting on operational focuses in Networks, HERE maps and that, overall, technology is improving. RBC analysts also noted that the company’s network division is benefiting from wireless capital expenditure in the United States as Sprint Corporation, T-Mobile US and China Mobile are all spending significantly on their wireless networks.
Additionally, LTE infrastructure in Europe is still in the initial stages. Meanwhile, Chinese carriers such as China Telecom and China Unicom might offer more possibilities for Nokia, the analysts also note. Moreover, a decline in operating expenditures has improved the company’s margin in its Network division. They also point our that a higher mix of “IMS / core, coverage, software” could increase the gross margin.