Barclays Maintains an 'Overweight' on Nokia (NOK); Cash Flow Analysis Provides Supportive Valuation Framework
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Price: $3.60 -1.1%
Rating Summary:
10 Buy, 14 Hold, 15 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 21 | Down: 24 | New: 29
Rating Summary:
10 Buy, 14 Hold, 15 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 21 | Down: 24 | New: 29
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Barclays maintains an 'Overweight' on Nokia (NYSE: NOK), PT $10.
Barclays analyst says, "The recent round of negative estimate revisions from Nokia coupled with the pending receipt of the Apple royalty payment has resulted in increased queries around Nokia's valuation, in particular the support provided by its cash balance. The significant number and size of one-time cash flows means forecasting future cash balances is more difficult than usual. By analyzing these moving parts, we conclude that the cash balance together with conservative valuations for Navteq and Nokia Siemens leaves the core handset business trading on just 0.2-0.3x EV/2012 sales. We acknowledge that shares are unlikely to respond positively to such valuation arguments as long as estimate momentum remains negative, but with weak 2Q/3Q11 results already forecast we see limited further negative revisions."
"We forecast EUR1.57 per share of net cash by YE11 and EUR1.80 at YE12, based on our expectation that fundamentals improve and compared to EUR1.72 per share at 1Q11. In our bear case scenario of a decline to 20% market share, we still see c.EUR1.40 per share of cash at YE11 and 12. Based on this analysis, net cash represents 35%-40% of the current share price."
For more ratings news on Nokia click here and for the rating history of Nokia click here.
Shares of Nokia closed at $6.02 yesterday, with a 52 week range of $5.81-$11.75.
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Barclays analyst says, "The recent round of negative estimate revisions from Nokia coupled with the pending receipt of the Apple royalty payment has resulted in increased queries around Nokia's valuation, in particular the support provided by its cash balance. The significant number and size of one-time cash flows means forecasting future cash balances is more difficult than usual. By analyzing these moving parts, we conclude that the cash balance together with conservative valuations for Navteq and Nokia Siemens leaves the core handset business trading on just 0.2-0.3x EV/2012 sales. We acknowledge that shares are unlikely to respond positively to such valuation arguments as long as estimate momentum remains negative, but with weak 2Q/3Q11 results already forecast we see limited further negative revisions."
"We forecast EUR1.57 per share of net cash by YE11 and EUR1.80 at YE12, based on our expectation that fundamentals improve and compared to EUR1.72 per share at 1Q11. In our bear case scenario of a decline to 20% market share, we still see c.EUR1.40 per share of cash at YE11 and 12. Based on this analysis, net cash represents 35%-40% of the current share price."
For more ratings news on Nokia click here and for the rating history of Nokia click here.
Shares of Nokia closed at $6.02 yesterday, with a 52 week range of $5.81-$11.75.
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