Nokia: Bargain of a Lifetime - Barron's
Handset makers took a beating last week amid weak earnings from Palm (PALM), and after Research In Motion's (RIMM) FQ2 earnings outlook came in below expectations. Nokia (NOK) and Apple (AAPL) fell in sympathy - 1.1% and 3% respectively.
Nokia has been hit by multiple analyst downgrades in recent weeks - and Barron's Plugged In editor Mark Veverka can't understand why. He thinks fears that the escalating cost of food (rice) in key emerging markets like China and India are overblown, suggesting some analysts fail to understand just how pervasive mobile communication is in developing lands, or the key role Nokia plays.
Shares trade near their 52-week low, and fetch just 9x 2009 earnings -- vs. 26x for AAPL and 32x for RIMM. Strong iPhone sales will only further entrench 3G, driving Nokia's sales higher.
Nokia said last week it is spending $410M to buy the shares of mobile software developer Symbian it doesn't already own. What it plans to do with Symbian caught a lot of insiders off guard. Nokia said it will donate Symbian's S60 platform to a newly-formed open-source foundation, the Symbian Foundation, whose members (SNE, ERIC, MOT, DCM, T, STM, TXN VOD) span the mobile market. The move should enable the Nokia-lead consortium to accelerate product development, and rival Google's Android-based Open Handset Alliance.
"If you believe in the long-term power of the mobile Internet," Veverka says, "Nokia looks like the bargain of lifetime."
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On Thursday, Credit Suisse downgraded Nokia to Neutral. It thinks Nokia's 49.4% stake in the smartphone market is unsustainable given pressures from RIMM, AAPL and HTC.
But earlier last week, Nokia uber-maven Tero Kuittinen turned positive on Nokia. Tero was one of the only analysts who spotted the market share erosion in Nokia’s European heartland when he went negative on the stock back in January. Tero notes the company just started shipping new, radically improved €70 and €90 models, which should help it extend its low-end market share leadership this summer. As SA poster Notable Calls puts it: "No one, I mean no one knows Nokia better than Tero."
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This article has 15 comments:
How old is that analyst Veverka??? Is he too young to remember when NOK traded at ~$3 in the mid-90's, or even sub $15 just a few years ago.
He may think it's a good buy now, but good gawd, no reason for him to use silly (easily refuted) hyperbole to make his case.
We do need to hold analysts accountable for hyperbole. You might have also added that 9x earnings is not necessarily cheap...and certainly not "Bargain of a lifetime" cheap.
Lutz
I agree on the view on Asian manufacturers, they're quietly grabbing massive market share while Nokia struggles in the headlines. LG and Samsung are the new ho
ngbang
p.s. Isn't Mark Veverka the shameless hitman who started the bullcrap about Jobs' health?
I guess, this is a "what doesnt kill you will make you stronger" kind of argument for nokia, haha...