Scotia Analyst: Nokia Undervalued; Rates It a "Buy"

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.

He concluded:

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).

Comments

[rcprofit]

i agree!

[John Galt]

The most important thing Nokia needs to do is create an SDK and open up their system to third party programmers. Apple is doing this, and it is critical to getting the support needed to compete in the "more than a phone" market. This is like the early days of PC's, and the real driving apps will come from people unrelated to the hardware manufacturers (just like Lotus 123 exploded the PC market). Until they do that, they ae doomed to be followers. But they have an opportunity to be first with a "non-apple" SDK and capture an entire generation of applications developers who still live with Windows.

[jaccks]

John, think you may want to check out Forum Nokia www.forum.nokia.com/

Nokia has thousands of developer apps already available - They are miles ahead of Apple and RIM here...

[Texrat]

Yeah, I have to wonder where John Galt got the mistaken impression that there's no API...