First Security Van Kasper Initiated Coverage on Nokia Corporation : Strong Buy Rating
J.P. Mark, Telecommunications Services analyst at FS Van Kasper, has initiated coverage on Nokia Corporation with a Strong Buy rating and a 12-month price target of $76.
Below are direct quotations from Mr. Mark's research report:
We have initiated coverage of Finland-based Nokia Corporation with a Strong Buy rating and a 12-month price target of $76. In our opinion, Nokia is one of the leading wireless telecom equipment suppliers in the world, and should be considered a core long-term holding for all growth-oriented investors.
In the span of just five years, Nokia has transformed itself from a second-tier Scandinavian equipment manufacturer, a poor stepchild to its larger ``cousin'' Ericsson, into a global telecommunications powerhouse.
The company now competes successfully against the world's leading communications, networking and wireless companies, including Motorola, Lucent, Nortel and Cisco.
According to First Quarter 2000 Dataquest handset estimates, which reflect sell-through of mobile phones worldwide, Nokia currently holds a 27.9% share, representing 25.1 million handsets
Of the 430-460 million handsets that are likely to be shipped this year, we believe that Nokia may ultimately garner more than 31% market share. If so, mobile phones could account for more than EUR21 billion (71%) of 2000 revenues.
Nokia shares are expensive, in our opinion, but investors should be willing to pay a premium to own one of theleading global telecommunications franchises. At current prices, Nokia is trading at approximately 55-60x 2001 earnings estimates. By comparison, Nortel now trades at approximately 60-65x while Cisco trades at more than 80x. We believe that Nokia should be given at least as great a multiple as Nortel's. And in so far as Nokia may be a faster growing company than Cisco, it should be considered in approximately the same league.
On a P/E to growth basis, we believe that valuation comparisons are even more compelling: Nokia currently trades at approximately 1.8x P/E/G versus Ericsson at 2.1x, Nortel at 2.5x and Cisco at nearly 3.0x. By these measures,Nokia's large P/E multiple seems to us more within the range of investors.
Again, while we do not consider Nokia to be a cheap stock by any means, investors should be willing to pay a premium for the management, execution abilities and formidable marketing talents of the company.
First Security© Van Kasper is a private brokerage and investment banking firm. businesses. The firm's offices are located in San Francisco, Fresno, Los Angeles, San Diego, Newport Beach, SanJose, Sacramento, and Walnut Creek, California, as well as Phoenix, Arizona and New York City, New York. |
