Analysts Comment on Nokia's (NOK) Q3 Results: It Can't Get Much Worse
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Price: $3.65 -0.82%
Rating Summary:
20 Buy, 17 Hold, 6 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
Rating Summary:
20 Buy, 17 Hold, 6 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
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Nokia Corp. (NYSE: NOK) shares are trading lower Friday following third-quarter results issued ahead of trading on Thursday morning as analysts continue to chime in on the numbers. The Finnish firm reported a non-IFRS loss of €0.07 per share versus consensus loss expectations of €0.08 per share. As expected Nokia's Devices & Services unit led the decline in top-line growth, with many consumers holding off on the purchase of a new Windows Phone due to WP7 devices not being able to upgrade to the latest WP8 version. Revs in D&S were €3.6 billion, missing many analysts lowered expectations.
Nomura's Stuart Jeffrey - "NSN looks set to generate around 9% margin for H2 2012, a marked turnaround for a previously ailing business. Results and our checks all point to a much improved outlook. We thus see an increased likelihood of a successful deconsolidation of NSN. Symbian declines continue to miss already low expectations but are becoming increasingly immaterial. Windows Phone prospects remain unclear as the latest phones are still to launch. If Windows 8 traction remains weak, Windows Phone can disappoint in H1. Our 2014 estimates assume a solid uptake in Windows Phone sales and so remain vulnerable to revision. While our base case is positive for Nokia earnings, we think that it remains too early, by at least 9 months, to look to get materially involved in the story. FY12E EPS from - $0.37 to -$0.29; FY13E EPS from -$0.13 to -$0.09." Maintains Neutral, target up from $1.90 to $2.10.
Canaccord Genuity's T. Michael Walkley - Nokia reported better than expected Q3/12 results, with non-IFRS LPS of $(0.09) versus our $(0.12) estimate. Better than anticipated NSN results offset ongoing weak Device & Services sales. Q3/12 net cash and liquid assets decreased €633M due to cash outflows for restructuring charges and Devices & Services operating losses even with Microsoft’s $250M platform payment and strong NSN cash generation. Our belief 2013 remains a challenging transitional year for Nokia is unchanged. We maintain our HOLD rating and slightly increase our price target to $3 based on strong NSN trends. Maintain Hold, target up to $3.
Needham & Company's Charlie Wolf - "We knew Nokia's third quarter would be bad. But it was no worse than anticipated. We’re maintaining our hold rating and raising our 2012 estimate from a loss of €0.27 to a loss of €0.21. We’re maintaining our 2013 estimate at €0.25... The bad news in the quarter was a sequential implosion in smartphone sales. Unit sales fell to 6.3 million units, down 63% year-over-year and 38% sequentially. This decline was virtually guaranteed after Microsoft pulled the plug on Windows 7.5, the previous version of the Windows Phone operating system Investment highlights... The big news is that Nokia will launch the Lumia 920 and 820 phones running Microsoft’s new Windows Phone 8 operating system on the AT&T network in November." Maintain Hold
Wedbush's Scott Sutherland - "While in-line Q3 results highlighted continued deterioration in Nokia’s core mobile phone business and greater-than-expected cash burn, we believe the future continues to hinge on the successful introduction of the Windows Phone 8 (WP8) smartphone and future releases, which we believe is positioned to be a viable 3rd ecosystem. However, as the transition remains early, we are maintaining our neutral stance. Smartphone unit sales of 6.3M was below our estimate of 9.7M given the continued decline in Symbian phones and a larger-than-expected dip in current Lumia phones ahead of the WP8 Lumia phone launch, as Nokia sold 2.9M Lumia phones vs. 4.0M in Q2...Total phone sales of 76.6M units were above our estimate of 71.9M, as full touch ASHA sales were solid at 6.5M units." Maintains Neutral, raises target $1 to $3.
Northland Capital Markets' Tom Sepenzis - "Windows woes kept Nokia from delivering what would have otherwise been a remarkable quarter – relatively speaking. Unit sales of Lumia devices were a mere 2.9 million, far below our expectations of 5.2 million. While there was certainly the expectation of stalled sales at the high-end after the Windows Phone 8 announcement by Microsoft in June, we did expect the lowerend devices to perform better. The big question remains – can Microsoft and Nokia get the platform off the ground in earnest? We believe they will, and that Nokia is in position to see revenue and operating performance improvements going forward. Now is a great time to get back involved." Maintains Outperform and $5 price target.
Wells Fargo's Jennifer Fritzsche - "Nokia reported mixed Q3 results in what the company considered a tough transitional quarter as D&S weakness was compensated for by a strong NSN quarter. The weakness in D&S was driven by a slowdown in smart device shipments (6.3MM in Q3 vs. 10.4MM in Q2 and 16.8MM in 3Q 2011) as the company prepares to launch its new Windows 8 Lumia device line in Q4 in select markets. NSN operating margin improved dramatically to 9.2%, up from 0.8% in Q2, due to restructuring/cost reduction efforts and a favorable mix." Maintains Market Perform, lifts valuation range from $1.75 - $2 up to $2.50 - $2.75.
Deutsche Bank's Kai Korschelt - "Nokia reported broadly in-line Q3 results with its Q4 device margin outlook below consensus. We expect Devices to lose further share in the seasonally strong Q4 and FCF and margins to deteriorate again in H113. We maintain our cautious fundamental view based on muted consumer traction of new Windows 8 devices and mid-term cannibalization risk to Nokia's mobile phone business from low-cost Android devices. We continue to see limited consumer traction for Nokia’s Windows 8 devices in an ever more competitive smartphone market. We remain concerned that Win 8’s high hardware requirements may not allow Nokia to profitably compete in the fast-growing <$200 smartphone market. We also believe that low-cost Android smartphones (<$100 ASP) will start to cannibalize Nokia’s mobile phone business (~65% of device revenues) from 2013 onwards and model continuing unit and revenue declines here." Maintains Sell, price target from €1.60 to €1.50.
Nomura's Stuart Jeffrey - "NSN looks set to generate around 9% margin for H2 2012, a marked turnaround for a previously ailing business. Results and our checks all point to a much improved outlook. We thus see an increased likelihood of a successful deconsolidation of NSN. Symbian declines continue to miss already low expectations but are becoming increasingly immaterial. Windows Phone prospects remain unclear as the latest phones are still to launch. If Windows 8 traction remains weak, Windows Phone can disappoint in H1. Our 2014 estimates assume a solid uptake in Windows Phone sales and so remain vulnerable to revision. While our base case is positive for Nokia earnings, we think that it remains too early, by at least 9 months, to look to get materially involved in the story. FY12E EPS from - $0.37 to -$0.29; FY13E EPS from -$0.13 to -$0.09." Maintains Neutral, target up from $1.90 to $2.10.
Canaccord Genuity's T. Michael Walkley - Nokia reported better than expected Q3/12 results, with non-IFRS LPS of $(0.09) versus our $(0.12) estimate. Better than anticipated NSN results offset ongoing weak Device & Services sales. Q3/12 net cash and liquid assets decreased €633M due to cash outflows for restructuring charges and Devices & Services operating losses even with Microsoft’s $250M platform payment and strong NSN cash generation. Our belief 2013 remains a challenging transitional year for Nokia is unchanged. We maintain our HOLD rating and slightly increase our price target to $3 based on strong NSN trends. Maintain Hold, target up to $3.
Needham & Company's Charlie Wolf - "We knew Nokia's third quarter would be bad. But it was no worse than anticipated. We’re maintaining our hold rating and raising our 2012 estimate from a loss of €0.27 to a loss of €0.21. We’re maintaining our 2013 estimate at €0.25... The bad news in the quarter was a sequential implosion in smartphone sales. Unit sales fell to 6.3 million units, down 63% year-over-year and 38% sequentially. This decline was virtually guaranteed after Microsoft pulled the plug on Windows 7.5, the previous version of the Windows Phone operating system Investment highlights... The big news is that Nokia will launch the Lumia 920 and 820 phones running Microsoft’s new Windows Phone 8 operating system on the AT&T network in November." Maintain Hold
Wedbush's Scott Sutherland - "While in-line Q3 results highlighted continued deterioration in Nokia’s core mobile phone business and greater-than-expected cash burn, we believe the future continues to hinge on the successful introduction of the Windows Phone 8 (WP8) smartphone and future releases, which we believe is positioned to be a viable 3rd ecosystem. However, as the transition remains early, we are maintaining our neutral stance. Smartphone unit sales of 6.3M was below our estimate of 9.7M given the continued decline in Symbian phones and a larger-than-expected dip in current Lumia phones ahead of the WP8 Lumia phone launch, as Nokia sold 2.9M Lumia phones vs. 4.0M in Q2...Total phone sales of 76.6M units were above our estimate of 71.9M, as full touch ASHA sales were solid at 6.5M units." Maintains Neutral, raises target $1 to $3.
Northland Capital Markets' Tom Sepenzis - "Windows woes kept Nokia from delivering what would have otherwise been a remarkable quarter – relatively speaking. Unit sales of Lumia devices were a mere 2.9 million, far below our expectations of 5.2 million. While there was certainly the expectation of stalled sales at the high-end after the Windows Phone 8 announcement by Microsoft in June, we did expect the lowerend devices to perform better. The big question remains – can Microsoft and Nokia get the platform off the ground in earnest? We believe they will, and that Nokia is in position to see revenue and operating performance improvements going forward. Now is a great time to get back involved." Maintains Outperform and $5 price target.
Wells Fargo's Jennifer Fritzsche - "Nokia reported mixed Q3 results in what the company considered a tough transitional quarter as D&S weakness was compensated for by a strong NSN quarter. The weakness in D&S was driven by a slowdown in smart device shipments (6.3MM in Q3 vs. 10.4MM in Q2 and 16.8MM in 3Q 2011) as the company prepares to launch its new Windows 8 Lumia device line in Q4 in select markets. NSN operating margin improved dramatically to 9.2%, up from 0.8% in Q2, due to restructuring/cost reduction efforts and a favorable mix." Maintains Market Perform, lifts valuation range from $1.75 - $2 up to $2.50 - $2.75.
Deutsche Bank's Kai Korschelt - "Nokia reported broadly in-line Q3 results with its Q4 device margin outlook below consensus. We expect Devices to lose further share in the seasonally strong Q4 and FCF and margins to deteriorate again in H113. We maintain our cautious fundamental view based on muted consumer traction of new Windows 8 devices and mid-term cannibalization risk to Nokia's mobile phone business from low-cost Android devices. We continue to see limited consumer traction for Nokia’s Windows 8 devices in an ever more competitive smartphone market. We remain concerned that Win 8’s high hardware requirements may not allow Nokia to profitably compete in the fast-growing <$200 smartphone market. We also believe that low-cost Android smartphones (<$100 ASP) will start to cannibalize Nokia’s mobile phone business (~65% of device revenues) from 2013 onwards and model continuing unit and revenue declines here." Maintains Sell, price target from €1.60 to €1.50.
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