BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F HOLD December 10, 2017 HOLD RATING SINCE 05/16/2016 BUSINESS DESCRIPTION Nokia Corporation, together with its subsidiaries, provides network infrastructure and related services worldwide. The company operates through three segments: Ultra Broadband Networks, IP Networks and Applications, and Nokia Technologies. Sector: Technology Sub-Industry: Communications Equipment Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years 7.50 7.00 6.50 6.00 STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change -25.21-1.49-17.65 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 0.83 10.57 17.98 Net Income -50.97-254.73 NA EPS -150.00 35.72 NA RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017-2.52 12.18 13.41 Q3 2016-5.09 10.98 11.79 Q3 2015 10.29 6.40 12.91 Rating History BUY Volume in Millions HOLD 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History 5.50 5.00 4.50 4.00 200 100 0 P/E COMPARISON RECOMMENDATION We rate () a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing nesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find nesses including deteriorating net income, operating cash flow and a generally disappointing performance in the stock itself. n/m EPS ANALYSIS¹ ($) Q1 0.05 Q2 0.10 Q3 0.05 Q4 0.13 27.53 Ind Avg Q4 0.14 25.35 S&P 500 Q1-0.09 Q2-0.09 HIGHLIGHTS 's revenue growth has slightly outpaced the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. 's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.23, which illustrates the ability to avoid short-term cash problems. 2015 Q1-0.13 Q2-0.12 Q3-0.02 2016 NA = not available NM = not meaningful Q3-0.05 2017 1 Compustat fiscal year convention is used for all fundamental data items. 49.83% is the gross profit margin for which we consider to be. It has increased from the same quarter the previous year. Regardless of the results of the gross profit margin, the net profit margin of -3.62% is in-line with the industry average. Net operating cash flow has significantly decreased to -$856.13 million or 493.31% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower. The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 51.0% when compared to the same quarter one year ago, falling from -$167.82 million to -$253.36 million. PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -20% 50% PANW UNFAVORABLE -5% ERIC EBITDA Margin (TTM) ARRS JNPR COMM FAVORABLE HRS UBNT FFIV CSCO ANET 40% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $5.2 Billion and $184.9 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -20% 50% UNFAVORABLE ERIC -12% Earnings Yield (TTM) PANW FAVORABLE ANET UBNT ARRS JNPR HRS FFIV CSCO COMM Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -11.5% and 43.9%. Companies with NA or NM values do not appear. 6% INDUSTRY ANALYSIS The US communications equipment industry is comprised of companies that manufacture communication equipments and products, including LANs, WANs, routers, telephones, switchboards and exchanges. The industry is highly competitive and characterized by rapidly changing technologies, evolving industry and government standards, changes in customer preferences, and new product introductions and enhancements Companies compete on the basis of product performance, quality, customer service, technological innovation, delivery time and price. The industry is becoming increasingly concentrated and globalized, dominated by large players with significant financial resources and technological capabilities. Cisco Systems (CSCO), Nokia (), Motorola Solutions (MSI), and Ericsson (ERIC) are large players. Industry demand is dependent on the capital spending of cellular and broadband companies for constructing, rebuilding or upgrading their communications systems. The domestic market is evolving at a brisk pace as cable and telecom network operators expand their video, data and voice services, commonly known as the triple play, to expand their subscriber base. Telecom operators are expanding their broadband networks and offering advanced video and data services using IPTV and PON technologies. Cable operators are responding by bundling voice-over-ip services and expanding their broadband data service through Data Over Cable Service Interface Specifications (DOCSIS). Companies are regulated by the United States Federal Communications Commission (FCC) and other global governmental communication regulators. The International Telecommunications Union (ITU) adopts cellular wireless access standards for cellular industry infrastructure. The industry faces investment risks related to the introduction of new products for the transmission of telephony and high-speed data over hybrid fiber coaxial cable systems. Research and development is a complex and uncertain process, requiring high levels of innovation and an accurate understanding of market trends. The industry has witnessed consolidation in order to facilitate product breadth and improve technologies. PEER GROUP: Communications Equipment Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) 4.63 27,036 NM 25,460.11-544.97 FFIV F5 NETWORKS INC 131.83 8,252 20.19 2,090.04 420.76 COMM COMMSCOPE HOLDING CO INC 37.41 7,136 38.17 4,619.06 194.65 ARRS ARRIS INTERNATIONAL PLC 29.14 5,450 33.11 6,635.02 167.84 UBNT UBIQUITI NETWORKS INC 67.23 5,233 21.34 906.38 260.64 ERIC TELEFONAKTIEBOLAGET LM ERICS 6.25 19,202 NM 23,828.72-2,204.60 CSCO CISCO SYSTEMS INC 37.40 184,891 19.38 47,789.00 9,681.00 HRS HARRIS CORP 143.20 17,070 26.82 5,893.00 554.00 ANET ARISTA NETWORKS INC 219.86 16,072 45.43 1,506.29 378.15 PANW PALO ALTO NETWORKS INC 142.83 13,125 NM 1,869.00-223.70 JNPR JUNIPER NETWORKS INC 28.42 10,655 17.02 5,173.30 643.20 The peer group comparison is based on Major Communications Equipment companies of comparable size. PAGE 2
COMPANY DESCRIPTION Nokia Corporation, together with its subsidiaries, provides network infrastructure and related services worldwide. The company operates through three segments: Ultra Broadband Networks, IP Networks and Applications, and Nokia Technologies. It offers mobile networking solutions, such as hardware, software, and services for telecommunications operators, enterprises, and related markets/verticals; radio access network solutions; Internet protocol multimedia subsystem/voice over LTE, subscriber data management and other virtualized software infrastructure solutions; backhaul solutions; and network planning, implementation, operations, and maintenance solutions. The company also provides fixed networking solutions, including copper based solutions, such as VDSL2 Vectoring, Vplus, and G.fast; fiber-to-the-home solutions, such as Ethernet point-to-point, gigabit passive optical networks (GPON), EPON, and 10 gigabit next generation fiber technologies, as well as fiber access technologies; digital home devices; and copper and fiber broadband evolution, public switched telephone network transformation, ultra-broadband network design, deployment and operation, site implementation and outside plant, and multi-vendor maintenance services. In addition, it offers IP/optical networking solutions, such as IP routing and optical transport systems, software, and services; and packet-optimized and optical transport solutions. Further, the company provides software solutions, including customer experience management, network operations and management, communications and collaborations, policy and charging, as well as Cloud, Internet of Things, security, and analytics platforms; and submarine networks and radio frequency systems. Nokia Corporation was founded in 1865 and is headquartered in Espoo, Finland. Karaportti 3 Espoo 02610 FIN Phone: 358 1044 88000 Fax: 358 1044 81002 http://www.nokia.com Employees: 101000 STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 2.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 30% of the stocks we rate. Total Return 1.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 20% of the companies we cover. Efficiency 1.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 20% of the companies we review. Price volatility 1.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 10% of the stocks we monitor. Solvency 3.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 60% of the companies we analyze. Income 5.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 90% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.11 Q4 FY17 0.34 E 2017(E) 0.31 E 2018(E) INCOME STATEMENT Net Sales ($mil) 6,984.92 6,926.95 EBITDA ($mil) 934.35 685.37 EBIT ($mil) 429.23 248.24 Net Income ($mil) -253.36-167.82 FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 has increased when compared to the same period a year ago. Even though sales increased, the net income has decreased, representing a decrease to the bottom line. has average liquidity. Currently, the Quick Ratio is 1.23 which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has decreased from the same period last year, indicating deteriorating cash flow. During the same period, stockholders' equity ("net worth") has decreased by 6.22% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 7,768.23 10,554.73 Total Assets ($mil) 48,236.02 48,783.04 Total Debt ($mil) 4,542.10 4,330.00 Equity ($mil) 19,595.40 20,897.06 PROFITABILITY Gross Profit Margin 49.83% 44.81% EBITDA Margin 13.37% 9.89% Operating Margin 6.15% 3.58% Sales Turnover 0.53 0.47 Return on Assets -1.12% 0.72% Return on Equity -2.52% -5.09% DEBT Current Ratio 1.59 1.62 Debt/Capital 0.19 0.17 Interest Expense 80.21 88.53 Interest Coverage 5.35 2.80 SHARE DATA Shares outstanding (mil) 5,606 5,772 Div / share 0.00 0.00 EPS -0.05-0.02 Book value / share 3.50 3.62 Institutional Own % NA NA Avg Daily Volume 13,897,690 11,447,893 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4
RATINGS HISTORY Our rating for has not changed since 5/16/2016. As of 12/7/2017, the stock was trading at a price of which is 30.4% below its 52-week high of $6.65 and 2.9% above its 52-week low of $4.50. 2 Year Chart BUY: $7.38 HOLD: $5.21 2016 $8.00 $7.00 $6.00 $5.00 MOST RECENT RATINGS CHANGES Date Price Action From To 5/16/16 $5.21 Downgrade Buy Hold 12/7/15 $7.38 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/7/2017) 45.41% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.81% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 23.78% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION HOLD. This stock s P/E ratio is negative, making its value useless in the assessment of premium or discount valuation, only displaying that the company has negative earnings per share. For additional comparison, its price-to-book ratio of 1.32 indicates a significant discount versus the S&P 500 average of 3.22 and a significant discount versus the industry average of 3.88. The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. After reviewing these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings NM Peers 27.53 Neutral. The absence of a valid P/E ratio happens when a stock can not be valued on the basis of a negative stream of earnings. 's P/E is negative making this valuation measure meaningless. Price/Projected Earnings 15.03 Peers 18.88 Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. is trading at a significant discount to its peers. Price/Book 1.32 Peers 3.88 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 1.02 Peers 3.56 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 60.24 Peers 18.63 Premium. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant premium to its peers. Price to Earnings/Growth NA Peers 0.66 Neutral. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. Ratio not available. Earnings Growth lower higher 35.72 Peers -6.76 Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth lower higher 10.57 Peers 4.65 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that significantly exceeds its peers. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. PAGE 5