Oppenheimer has downgraded Finnish mobile maker Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) from “Perform” to “Underperform” but has not set any price target on the stocks.
Nokia to face intense competition
According to analyst Ittai Kidron, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) will face dreaded competition in the second half of 2013 and the mobile business will weigh heavily on the financials. Nokia has recently unveiled Lumia 1020, which will face competition from Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) who are providing great discount deals and schemes on their popular devices.
Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More
Kidron pointed Nokia Siemens Network (NSN) as one of the bright spots. He added that margin expansion will be the after effect of cost cuts and assets sales. According to Bloomberg data, Nokia will earn 5.7 percent of gross profit from Smartphones, and around 32 percent of overall gross profit from phone segment. Nokia’s network unit has contributed around 49 percent of gross profit.
Rating from other analysts
Analysts at Raymond James maintained ‘Underperform’ rating on the stock after the earnings. Analysts at Canaccord Genuity has stated a “Hold” rating on the stock and assigned a price target in the range of $3.50 to $3.30 in the research note issued on July 2. Goldman Sachs analyst maintained “Sell” rating on Nokia’s stock in a research note to investors on July 1. JP Morgan Chase & Co, in a note to investors on July 1, upgraded Nokia from “Underweight” to an “Overweight” rating.
Nokia 2Q performance
For the second Quarter, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) posted revenue of €5.7 billion; decline of 24.5 percent y/y. Nokia sold 53.7 million feature phones, a decline of 27.4 percent y/y and less than the Raymond James expectation of 60 million, during the second quarter. Revenues from Nokia Siemens Network came in at €2.8 billion, a decline of 16.8 percent y/y and were below expectations of €395 million.
Lumia series from devices Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) posted descent sales in the second quarter. However, the Lumia’s sold were in the range of $200 on an average, which suggests that Nokia should enhance the sales of its upper segment. Nokia stated that overall device revenue will surge in third quarter but remained silent on the revenue from smartphones segment. Raymond James analysts are expecting an operating loss of €700 million this year and sales of Lumia at 20 percent gross margin. Analysts feel that this would not be enough to enhance the margin and profit the business.
Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)‘s feature phones segment declined due to channel inventory movement issues. In the third quarter, analysts are estimating surge in business once the channel inventory becomes stable. For fiscal 2013, EBIT is expected to decline to €343 million, against €533 million in 2012.