- Prudential is lowering their Q1 EPS on Nokia (NYSE:NOK) below cons. to 0.23 (down by 0.03) and Q2 to 0.24 (down 0.02). Even with decent unit volumes and associated share gains, they expect near-term results to be impacted by lingering price discounting that has affected market players for the past few quarters, which will likely limit earnings power in 1H07. Firm does not believe the ASP pressure is due to geography mix alone, as price discounting is evident in developed markets too.
Firm expects new devices, like the new N-Series and E-Series, to start to ramp from mid-March onwards; however, this means Q1 will still be largely dependent on the existing product line. They expect near-term ASP weakness will lead to weak near-term earnings.
Over the course of the year, they are more optimistic about a rebound in the business as new handsets begin to ship in volume and as the NOK/SI integration work proceeds once that deal closes. NOK releases up to 4 dozen new handset models a year, which should help relieve near-term ASP pressure. Firm expects margins to improve in 2H07, and they are raising their 4Q EPS estimate by 0.01.
Net-net, this does not change their overall thinking on the company, and they continue to view Nokia as the best-positioned handset maker. Firm believes this near-term weakness will yield to eventual recovery, but until we move closer to such recovery, they remain Neutral Weight with a $22 price target.
Notablecalls: You buy any of this stronger H2 talk? SI integration will save the day? Huh?
Firm expects new devices, like the new N-Series and E-Series, to start to ramp from mid-March onwards; however, this means Q1 will still be largely dependent on the existing product line. They expect near-term ASP weakness will lead to weak near-term earnings.
Over the course of the year, they are more optimistic about a rebound in the business as new handsets begin to ship in volume and as the NOK/SI integration work proceeds once that deal closes. NOK releases up to 4 dozen new handset models a year, which should help relieve near-term ASP pressure. Firm expects margins to improve in 2H07, and they are raising their 4Q EPS estimate by 0.01.
Net-net, this does not change their overall thinking on the company, and they continue to view Nokia as the best-positioned handset maker. Firm believes this near-term weakness will yield to eventual recovery, but until we move closer to such recovery, they remain Neutral Weight with a $22 price target.
Notablecalls: You buy any of this stronger H2 talk? SI integration will save the day? Huh?
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