Stocks

In my previous post, Invest in Nokia (NOK), I mentioned that Nokia’s turnaround story is painting a stronger and brighter picture. In Q4 of 2012, the Finnish company has become profitable and put a stop on their negative cash flow. Nokia has made many strategic moves to restructure the company and reduce costs. Now that the balance sheet is under control, Nokia will focus on their design and innovation.  The company is now a growth story. Below are some reasons to buy Nokia.

1. Nokia’s current flagship phone, the Nokia Lumia 920 has received high ratings and has been rated as one of the best smartphones currently in the market by reputable sites, besting in categories such as innovation, features, design, and productivity. Some of Nokia’s best features include Nokia’s 8.7 PureView camera (which is in a league of its own), Nokia Maps, Nokia Drive, Nokia City Lens, Nokia Transport, Nokia Music, Wireless Charging and more.
   Nokia Lumia 920 still rates better than the new Blackberry Z10 in many aspects. With the support of Microsoft for the Windows 8 platform, Nokia has a better advantage than Blackberry. If two phones are identical in specs except for the operating system (OS), users would logically opt for an OS that would be more intertwined with their daily lives, which is Windows today by market share.  However, the Nokia is better in specs in many ways and having a more popular OS will certainly strengthen it’s place for a more popular phone.
2. Nokia partners with China Mobile, the largest mobile phone business in the world, with over 700 million people using their service. This deal with China Mobile is a victory over Apple because Apple has not been successful in signing a contract with China Mobile.
3. Nokia’s flagship phone for China Mobile, the Lumia 920T, has been very high demand in China and has been sold out in many major cities, including Beijing and Shanghai. The Lumia 920T has been well received in China and more people are looking to buy the phone. China Mobile is highly subsidizing the phone for customers who sign a two-year data plan; the charge for the Lumia 920T is only 1 Yuan (roughly $0.16). Nokia needs to ramp up production to meet the large demand.
4. Nokia’s large portfolio of patents are winning lawsuits against competitors that try to infringe on its innovative technologies. A lawsuit against Research In Motion (BBRY) has forced BBRY to settle with Nokia with a one-time payment and on-going payments from BBRY to NOK. Nokia has won a lawsuit against Apple (AAPL) that awards Nokia a one-time payment and on-going royalties from Apple to Nokia.
5. Nokia HERE wins over Google for a new contract with Toyota for their mapping services. Nokia HERE has also won over Google for mapping content with Ford and many other car manufacturers. Almost 80% of all cars that are bought with a per-installed navigation system use Nokia HERE.

Disclaimer: I am long Nokia because I believe in the company’s turnaround story.

Nokia (NOK) is in the midst of a great turnaround story. They are working to gain back market share in the mobile business and to return to positive cash flow. If Nokia continues to innovate, make strategic business decisions, and execute their plans well like they have done in the past six months, they will certainly have the turnaround story become a success.

Nokia has recently launched their latest flagship phone, the Nokia Lumia 920, which has earned many honors in the mobile technology world and has bested Apple’s iPhone 5 and Samsung Galaxy S3 in many  categories.

Fundamentals

Stock Price: $4.00 (close as of Feb 1, 2013)
Market Cap: 14.98B
EPS -1.14
P/E: – (negative EPS)
Forward P/E: 22.22
Price/Sales: 0.37
Price/Book: 1.39

Data from Google Finance/ Yahoo Finance

Mobile Business

Nokia has made great progress in the Asian market.

Nokia has inked a deal with China Mobile, which has the world’s largest subscriber base of approximately 700 million users. If Nokia can attain 10% of their subscribers, that would account for 70 million phones alone.

Nokia is rated the most trusted band phone in India. India is another huge market for Nokia, with potential to gain and strengthen their global market share.

Mapping Business (NAVTEQ)

Institutional Holdings

Dividend Cut

Nokia recently decided to stop their dividend payout for the first time in 143 years. I think it is a smart move to eliminate the dividend and use the $1 Billion that they save to help grow their business.

Stock Buyback

Nokia is planning to repurchase up to $370 Million of shares. It is always a wise move to reduce the number of floating shares and thereby increasing the earnings of each share.

Stock Price

NOK has run up nicely after hitting a 52-week low price of $1.63 back in July 2012 and have gained a total of 68% since then. The stock chart currently shows an uptrend. I think the stock price will break $5 this year.  If NOK can hold at at least $5, then the stock will appear on the radars of the mutual fund managers. Once there is institutional accumulation, the stock price should easily see $8.

My target price for 2013 is a very conservative $5, even though I think NOK should be able to hit $8 this year. My target price for 2014 is $10.

Disclaimer: I am long Nokia because I believe in the company’s management, quality of its products and its commitment to innovation.

Data Source:
Google Finance
Yahoo Finance