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Better Cash Position, Strong Lumia Sales Lift Nokia's (NOK) Prospects - RBC Capital

November 26, 2012 11:08 AM EST Send to a Friend
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Price: $8.20 -3.07%

Rating Summary:
    14 Buy, 24 Hold, 7 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 16 | Down: 12 | New: 33
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RBC Capital lifted its price target on Nokia (NYSE: NOK) Monday from $3 to $4, although they reiterated a Neutral-steering "Sector Perform" rating. The firm cited a modestly better cash position and encouraging demand for new devices.

RBC's Mark Sue said the update for Nokia's new Windows 8 Lumia 920/820/822 portfolio is better, with carriers positioning it in the "best-value" category for the holiday season. He notes Lumia 920 sells for $99 with a two-year contract and $450 without commitment at AT&T. In Europe, the high-end Lumia lists for ~€600 ($778) without contract although some carriers are pushing it for ~€50–100 ($65–130) with commitments. "With Microsoft's aggressive Windows push, Nokia's Lumia 920/920/822 portfolio has been experiencing sell-outs at carriers and major retailers in the US (AT&T, Amazon, Walmart)," he notes. "Although new devices can often see a surge followed by a fade, we now believe that Nokia may exceed our 6.5M smartphone units forecast." However he notes the 920 still needs to lose some weight as it is 185gms vs. GS-III's 133gms and HTC 8Xs 130gms.

Sue also notes the low-end Asha smartphones provides incremental units/margins.

The analyst notes Nokia's working capital may be improving with a better operational performance in Nokia Siemens Networks (NSN), and Nokia may collect an incremental €150–200M from sale of Vertu assets. "We expect the sale-and-lease of its headquarters to be cash-neutral. Cash restructuring out-flows are expected to be ~€650M with ~€400M in Devices and ~€250M in NSN restructuring," Sue notes. "Nokia still needs to improve its net-cash of €0.98/share, but the situation may not be as dire as previously thought."

Despite the positives, the analyst notes that competition remains intense and will only increase as Huawei is expected to release its Windows 8 smartphone in early 2013. Which is in addition to Apple, Samsung on Android and in emerging Windows 8
(Samsung, HTC).

For an analyst ratings summary and ratings history on Nokia click here. For more ratings news on Nokia click here.

Shares of Nokia closed at $3.56 yesterday.




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