Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s recovery is complete, and it must now focus on sustainable growth, according to analysts at Nomura. The company announced that it would suspend its annual dividend so it could focus more on the recovery process.
In a report issued to investors by Nomura analysts this morning, they said Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s fourth quarter results were in line with its pre-announcement, and the most important new detail to take notice of is the fact that “gross margins drove most of the positive margin surprises in phones and networks.” The analysts said this is important because this type of growth “always feels more sustainable than opex-based growth.”
Nomura analysts are no longer concerned about liquidity. Nokia Corporation receives an annual $1 billion payment in cash from Microsoft Corporation (NASDAQ:MSFT) through the two companies’ partnership. That benefit will fade over time as Nokia pays Microsoft back gradually through licensing fees. However, they believe the company’s net cash will stabilize from 2014.
The analysts compared the Lumia handsets to the Asha Touch handsets, saying the Lumia line brings an upside which balances the downside risks from the Asha Touch line. They said the biggest problem with Asha Touch phones is their similarity to Nokia’s failed Symbian smartphone platform. Thus they believe that the two phones give a favorable risk-reward balance, but unfortunately they don’t see any “imminent catalysts” and believe Asha Touch phones might decline before traction on the Windows phones is gained.
Nomura analysts have rated shares of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) as Neutral and kept their target price at $4.31 per share. The stock is currently trading around $4.14 per share, having lost about 3 percent of its value since the markets opened this morning.
