Citigroup analyst Zahid Hussein this morning cut his rating on Nokia (NOK) to Sell from Hold, with a new target of $7.93, down from $9.23.
He notes that the stock trades at about a 30% P/E premium to the DJ Euro Stoxx 600 index – a premium he says is “umerited.” Writes Hussein: “We expect the ADR to continue to materially de-rate as the investment community focuses on worsening fundamentals, driven by intensifying competitive dynamics, and not near-term noise” on management and software strategy changes.
The analyst repeats his previous view that execution risk remains at Nokia, and that further market share losses are likely. Any near-term momentum in the stock would likely be driven by M&A speculation and additional management changes, not by fundamentals.
“We continue to see no compelling reason for a rebound in estimates and expect Nokia to lose further share at the high and low end in 2011/12,” he wries. “Although a drastic change in thinking for Nokia, we believe the replacement of Olli-Pekka Kallasvuo with a non-Finnish external CEO [former Microsoft exec Stephen Elop] does not guarantee improving execution nor a shift in strategy and we remain concerned over near-term dynamics given the lack of compelling high-end solutions.”
NOK is down 16 cents, or 1.6%, to $9.78.
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