Nokia Upgraded At Goldman Sachs, Seen As 'Clear Buying Opportunity'

Shares of Nokia Corp (ADR) (NYSE: NOK) have plunged about 27 percent year-to-date, following the company’s disappointing Networks margin guidance for FY16. Goldman Sachs’ Alexander Duval upgraded the rating for the company to Buy, while raising the price target from €5.50 to €5.70.

Analyst Alexander Duval commented that the pressure on shares presented a “clear buying opportunity,” since Nokia had “limited EU macro correlation” and enjoyed a “strategic edge from its fixed/wireless offer.” He added that Nokia’s shares were trading at lower multiples to LM Ericsson (NASDAQ: ERIC) shares, despite the former having higher growth and margins.

Catalyst In Sight

The Networks adjusted EBIT estimate for 2017 has been raised by 9 percent, while that for 2018 and 2019 have been raised by 2 percent each year. Duval believes Nokia could generate €1.15bn in cost synergies by 2018.

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“Nokia is about to enter its most intensive cost-cutting phase and management has historically shown itself adept at delivering efficiencies. We see scope for consensus upgrades mid term,” the analyst wrote. He added that Nokia seemed to be better positioned than some other wireless players, “given its solid fixed-line offer and the fact its R&D budget has grown ahead of the 5G transition.”

Moreover, pricing in the wireless market could improve in the longer term since the market structure had improved.