BofA: Nokia - Who's Calling My Phone? Upgrade to Buy
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Bank of America upgraded Nokia from Neutral to Buy, raising its target price from EUR 6.87 to EUR 10.70, with an ADR target increasing from $7.96 to $12.40. The bank argues that Nokia is successfully transforming from a traditional mobile phone and telecom equipment vendor into an optical networking powerhouse. This transition is bolstered by the Infinera acquisition, a CEO transition, and surging demand for optical infrastructure driven by AI data center construction.
BofA projects Nokia's earnings per share for 2026-2028 at EUR 0.35, EUR 0.41, and EUR 0.47, respectively, standing 13-15% above market expectations. The optical networks business is forecast to grow at a 17% compound annual growth rate, exceeding the company's own 10-12% guidance. Meanwhile, the IP networks division benefits from the European push for sovereign data centers, presenting a data center switch revenue opportunity exceeding EUR 400 million. In mobile infrastructure, operational margin is projected to expand from 13.4% in 2025 to 17.8% by 2028 through cost optimization and a software focus.
Furthermore, BofA sees meaningful replacement opportunities in Europe involving Huawei and ZTE. Assuming a 50% substitution rate, this could generate incremental revenue of EUR 1 billion for mobile infrastructure and EUR 681 million for network infrastructure by 2028. The valuation methodology has shifted to a sum-of-the-parts approach to reflect these diverse growth drivers.