Focus on Cash Burn and Feature Phones for Nokia's (NOK) Q3 - Analyst
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Price: $10.76 +1.89%
Rating Summary:
24 Buy, 13 Hold, 6 Sell
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Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
24 Buy, 13 Hold, 6 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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MKM Partners reiterated its Sell rating and $1.50 price target on Nokia (NYSE: NOK) ahead of third quarter results before the open on Thursday, October 18, saying with no WP8 yet the focus will be on cash burn and feature phones.
Except for a high cash burn, MKM said there is little scope for Nokia to disappoint in the quarter. The greater disappointment comes after the WP8 Lumias launch and failure to ignite.
MKM expects roughly in-line revenues of €7.00bn and slightly greater than consensus EBIT loss of (€304mn).
"It will surprise no one that smartphone (WP7.5 and Symbian) sales were weak in 3Q12. There was probably some near-term stabilization in feature phone units driven by the launch of new Asha models," the analyst comments. "There was likely also significant cash burn in the quarter. NOK has been up 39% over the past three months, versus up 5% for the S&P500, in anticipation of the WP8 Lumia launch. We think the next leg down for the stock will come over the next 1-2 quarters, as it becomes apparent that the WP8 Lumias will not fare much better than the WP7.5 Lumias."
On cash burn, the firm calculates the underlying quarterly operating cash burn of the Devices and Services unit at roughly €400mn. While NSN revenues are weak, the business is till generating cash from working capital, the firm notes. "We expect overall NOK cash burn to exceed €500mn in 3Q12, and potentially by a large amount depending on the timing of restructuring payments."
The firm does not see US demand meaningfully improving for the Windows Phone
operating system nor for Nokia hardware. "We remain unexcited about the upcoming Lumia 920 and Lumia 820 launches. Windows Phone is unlikely to gain much smartphone share and Nokia is losing share within the Windows ecosystem."
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 $2.56 yesterday.
Except for a high cash burn, MKM said there is little scope for Nokia to disappoint in the quarter. The greater disappointment comes after the WP8 Lumias launch and failure to ignite.
MKM expects roughly in-line revenues of €7.00bn and slightly greater than consensus EBIT loss of (€304mn).
"It will surprise no one that smartphone (WP7.5 and Symbian) sales were weak in 3Q12. There was probably some near-term stabilization in feature phone units driven by the launch of new Asha models," the analyst comments. "There was likely also significant cash burn in the quarter. NOK has been up 39% over the past three months, versus up 5% for the S&P500, in anticipation of the WP8 Lumia launch. We think the next leg down for the stock will come over the next 1-2 quarters, as it becomes apparent that the WP8 Lumias will not fare much better than the WP7.5 Lumias."
On cash burn, the firm calculates the underlying quarterly operating cash burn of the Devices and Services unit at roughly €400mn. While NSN revenues are weak, the business is till generating cash from working capital, the firm notes. "We expect overall NOK cash burn to exceed €500mn in 3Q12, and potentially by a large amount depending on the timing of restructuring payments."
The firm does not see US demand meaningfully improving for the Windows Phone
operating system nor for Nokia hardware. "We remain unexcited about the upcoming Lumia 920 and Lumia 820 launches. Windows Phone is unlikely to gain much smartphone share and Nokia is losing share within the Windows ecosystem."
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 $2.56 yesterday.
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