Scotia Bank analyst Gus Papageorgiou believes Nokia (NOK) is undervalued, giving it a "buy" rating and a price target of C$40 after its CEO outlined future growth plans for the giant player in the "hyper-paced" Smartphone market.
Mr. Papageorgiou sees a substantial, prolonged upside for Nokia, following the investor reception he attended last week. In a note released Monday, he outlined the reasons for his optimism, including aggressive plans to compete in the high-end Smartphone market, so far largely dominated by the rivalry between Research in Motion's (RIMM) Blackberry and Apple's (AAPL) iPhone.
Nokia is launching a wide array of new Smartphones and repositioning its image away from the hardware/"mobile phone" tag, by integrating services with its handsets to deliver web-enabled customer solutions. "Although Nokia's primary objective with this strategy is to differentiate its device portfolio, its secondary strategy is to derive a new revenue stream," wrote Mr. Papageorgiou. Beyond web repositioning, the company also re-aligned recruitment recently, hiring many business and technology staff with specific Internet and e-commerce skillsets.
The Scotia Bank analyst also pointed to strong fundamentals such as low production price-points, and very high volumes that play in favor of the Finnish manufacturer, especially on the middle-market segment. Nokia's N-series multimedia devices shipped close to 10 million units in the first quarter of 2008 alone, he wrote.
Nokia shares have sold off in the last few months and we see the company as very good value at these levels.
On Monday, Nokia shares hit a 52-week low at C$25.43, down 38.8% from their 52-week high of C$42.21, (Nov.7, 2007).