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Nokia: Goldman Cuts Rating To Sell After Recent 50% Bounce

This article is more than 10 years old.

Goldman Sachs analyst Simon Schafer this morning chopped his rating on Nokia shares to Sell from Neutral, setting a price target on the stock of $1.60. The stock closed yesterday at $2.27.

Schafer notes that Nokia's shares have rallied 50% since it reported Q2 results, driven by lower cash burn, expected second half device launches, management share purchases and M&A speculation. He advises using the recent strength as a selling opportunity.

The analyst notes that his estimates remain below consensus, and assume larger smartphone losses and a lower gross margin trajectory in feature phones that most other analysts. He thinks competing products from Apple, Samsung, HTC and Huawei will offset expected second-half launches of new Nokia Lumia phones. And he expects price pressure to intensify. He also thinks accelerating market shares losses will mute the recent improvement in investor sentiment.

And as for those M&A rumors...he's a skeptic.

Schafer thinks the company could find some value in its Nokia Siemens Networks and Navteq units, but that "Nokia’s current fixed cost, employee and scale attributes in its mobile phone business (leading to large cash burn given our view of continuing market share erosion), currently make it a relatively unattractive acquisition target in the absence of clearer traction of its turnaround strategy."

Despite the bearish report, Nokia is moving higher in a widespread market rally; NOK this morning is up 12 cents, or 5.1%, to $2.38.