|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | |
SEPTEMBER 24, 2003
By Olga Kharif A Wrong Call on Nokia? By focusing on its currency woes, investors may be overlooking the positives that some analysts say make the stock a bargain  Dour announcements are nothing new from Nokia. Reporting in July on second-quarter results, the world's largest cell-phone maker said next quarter's figures could be flat to slightly down, due mainly to exchange-rate fluctuations. Nokia's shares promptly dropped 20%, to $14.38. Then, on Sept. 9, midquarter guidance squashed hopes of higher sales as Asia put the SARS scare behind it and got back to business.
The stock, which had been gaining steadily after the July slump, immediately sagged 6%, to $16, on the day of the announcement, and by the closing bell on Sept. 23 it was down to $15.56. "It's not often that a stock loses its value after a company raises its earnings per share," says SoundView Technology analyst Matt Hoffman, who lists Nokia (NOK ) as a top pick and notes that the third-quarter earnings-per-share forecast of 17 cents was an improvement on previous guidance of 15.6 cents. CURRENCY HICCUP. What's an investor to make of the recent declines? One possibility: Disappointment is unwarranted, especially since Nokia's current problems stem largely from the greenback's weakness -- not operating performance. Currency fluctuations have been responsible for 60% of the decline in revenue per phone in the second quarter, estimates Peter Hofstra, senior investment analyst at the AIC Diversified Science & Technology fund. Instead of running away, investors may want to consider jumping in today, at what may eventually prove to be a depressed price. Nokia's cell-phone business, which supplies 79% of revenues, is ramping up and likely to see record unit sales in the fourth quarter, traditionally the strongest, says Sanford Bernstein analyst Paul Sagawa, who notes that Nokia is gaining market share and should control 40% of the global market by yearend. What's more, as Sagawa and other analysts note, its money-losing wireless infrastructure business, responsible for about 20% of total sales, should become profitable in the fourth quarter. Evidence that Nokia's fortunes are turning could come as early as Oct. 16, when its third-quarter earnings report is due. Some mutual funds haven't been waiting. Hofstra, who purchased Nokia in July at $14.50, says the stock now represents 6% of his fund's $113 million in holdings. "We got a real bargain," he says. At a price-to-2004 earnings ratio of 17, Nokia is trading well below No. 2 cell-phone maker Motorola (MOT ), with a p-e of 26.5, and wireless-equipment maker Ericsson (ERICY ), with a p-e of 63. SoundView's Hoffman believes Nokia could hit $22 within 12 months -- a 42% gain on today's price. TAKE IT WITH YOU. General market trends also seem to be working in Nokia's favor. Cell-phone sales are rising. In 2003, worldwide shipments should grow 16%, to 465 million, estimates Niel Strother, a senior analyst with tech consultancy Cahners In-Stat. (Nokia expects a more conservative 10% growth in handset sales this year.) In 2004, they'll reach 500 million, he says. Actual growth might come in even higher, thanks to the wireless number portability rule, which begins in November and will allow U.S. cell-phone users to retain their old numbers when changing carriers. When that switch occurs, users won't be able to keep their old carrier-specific phones. As a result, Nokia could sell an extra 10 million handsets, estimates Michael Mahoney, portfolio manager with EGM Capital hedge funds, which doesn't own Nokia shares. Many of those phones will be high-end models, Mahoney estimates, since service providers -- which buy the majority of Nokia's handsets -- plan to lure users into signing up for one- to two-year service plans by offering expensive units featuring cameras and color screens.
  | | |
 Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
