Nomura Equity Research analysts Stuart Jeffrey and Woo Jin Ho rate Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) as neutral. Summary from the latest Nomura report below.
Vodafone Group plc (LON:VOD) (NASDAQ:VOD) raised capex guidance by 37% in its H1 2014 results report this morning, reinforcing our view that Europe should drive solid industry growth for European equipment vendors. Spending increases are driven by mobile investments that we expect to benefit notably Ericsson (ADR) (NASDAQ:ERIC) (Buy) and Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) (Neutral) most.
Nokia valuation methodology
Our €5.70 / $7.80 target price is based on the following: €0.51 per share or €1.9bn for Here, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s mapping unit; €2.30 per share or €8.5bn for NSN; and €1.09 per share or €4.0bn for the Advanced Technologies unit. Post the Microsoft Corporation (NASDAQ:MSFT) deal, we treat €3.0bn cash as operational, and we assume €2.0bn is available for possible M&A equal to €0.54 per share and €2.9bn is available as excess/for distribution, equal to €0.77 per share. Last, we apply a normalized tax rate to earnings but add back a tax shield worth €0.46 per share to reflect Nokia’s €3.7bn in deferred tax assets. The benchmark for this stock is the NASDAQ Composite (INDEXNASDAQ:.IXIC).
Risks that may impede the achievement of the target price
Our forecasts could be negatively affected by a change in handset subsidy policies, a material further delay in the rollout of new applications and technologies, and higher capacity utilization – and thus prices for components. In addition, it is possible that independent software vendors capture an increasing share of the value in the handset market, while chipset suppliers may offer standard modules that negate Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s economy-ofscale advantages.
