Market Reaction to NOK Q1
Sisuman,
[Whoops! Sorry 'bout dat. The preceeding post was only half a post. I added an edit and the edit window only got half of me as it closed. Ouch!
Here's the full text ...
<< trrrrific! >>
Positive Reaction to Q1 Earnings
NOK set another 2 year (25 month) high and closed up +1.07 (+4.92%) at $22.81 on NYSE Thursday on relatively high volume of 23.86 million shares on a down Nasdaq Day.
While an almost fully recovered NOK is only up $4.71 (+26%) from its 2003 close of $18.10 -- +41% with dividends reinvested according to Nokia's handy 'Investors Calculator if I'm operating it correctly) but it's now up $11.92 (+109%) -- +112.4% with dividends reinvested for an annual yield of 56¼% -- from its August 12, 2004 low of $10.89.
It should be noted -- you, Sisuman, will be pleased to note -- that Motorola (MOT) closed at $22.57 on NYSE yesterday and that is the 1st time in a long time that NOK has closed higher than MOT Motorola is Nokia's closest comparative and MOT unlike NOK, is $2.42 off its 52 week high, and it has been trading all this year at a share price ~$2,00 higher than NOK.
AFX reports this morning that NOK1V "extended yesterday's solid gains in morning trade on the HEX, fueled by further bullish broker reaction to the group's expectations-beating first-quarter figures. At 11.42 am, Nokia was up 2.28% to 18.82 eur."
WestLB upgraded Nokia to ''hold'' from ''sell'' and raised its 2006 EPS estimate by 14 pct to 1.16 eur. ... WestLB said the move partly reflected relief that volume concerns did not materialize. It added that it expects ASPs will be higher than expected as the new E-series handset family and more 3G devices reach the market.
Lehman Brothers also upped its EPS estimate for 2006 5 pct to 1.20 eur partially on the back of the group's higher-than-expected handset market share stating "with the mobile phone market continuing to surprise and few competitors appearing to threaten, further upside to estimates seems a possibility."
[I'm looking forward to Luke and Jeffrey's take on the Nokia quarter but their report is not yet posted to Fidelity's server]
Nomura upped its full-year EPS estimate to 1.14 eur from 1.09 eur on the back of handset market share exceeding its forecasts and "excellent" performance of multimedia, the part of the group which makes the popular N70 and other smartphones and stated "Nokia looks on course to have what we believe will be a great year."
tinyurl.com
Nothing New Under the Sun
Following earnings, Nokia's old friend Per Lindberg of Dresdner Kleinwort Wasserstein (DrKW), who reiterates his NOK1V "sell" at least once a week reiterated it again and left his €11.80 price target unchanged, stating "we are intrigued to detect another quarter of diminishing free cash flow generation, the absence of operating margin leverage and management guidance towards stable market share development into the June quarter. The jury, we believe, is still out on the sustainability of Nokia's earnings."
What else is new?
Leaving on a High-End 3G Positive
Piper Jaffray analyst T. Michael Walkley raised the price target on shares of the handset maker to $27 from $26 stating ...
"Nokia noted solid handset trends, with particularly strong share gains in Latin America, Middle East, Africa and China offsetting share declines in Europe ... [Nokia] increased its leadership share [in WCDMA handsets and] with Nokia's growing share of WCDMA handsets that we believe carry above corporate average operating margins combined with our belief the WCDMA handset market doubles in 2006, we believe this will contribute to gradual improvement in Nokia's handset operating margins. ... Nokia noted its higher inventory entering the second quarter and its planned increase in marketing for the second quarter were due to its strong pipeline of new products the company is launching in the upcoming months. We believe Nokia continues to improve its mid-tier and high-tier product portfolio and the new products will help support strong operating margins."
Walkley raised his 2006 and 2007 earnings estimates to €1.10 ($1.32) on revenue of €40.2 billion and €1.25 on revenue of €42.3 billion, respectively, from €1.03 on revenue of €39.2 billion and €1.21 on revenue of €40.9 billion, and maintained an "outperform" rating on Nokia shares.
tinyurl.com
Credit Suisse says Nokia's (NOK) margin improvement revealed in 1Q is the beginning of a trend and maintains the view that a move to a new low cost platform, rising WCDMA sales, where it believes gross margins are structurally above 2.5G levels, and continued share gains should drive margin recovery through 2006. It sees upside to its above consensus EPS estimates to EUR1.10-EUR1.15 from EUR1.05 for '06, and to EUR1.30-EUR1.35 from EUR1.20 for '07 and finds the stock attractive from valuation perspective. It keeps outperform recommendation and EUR19 price target. Trades +1.8% at EUR18.73.
tinyurl.com
Industry Commentators
A very former contributor to this board -- Tero Kuittinen -- now writes for TheStreet.com's 'RealMoney' (a worthwhile paid subscription is required) and yesterday in an excellent article titled 'Smartphone Era Dawns for Nokia' he astutely observed ...
Nokia has maintained a 50%-plus market-share lock on smartphones for the past decade while rivals have been too scared by the telecom crash of 2001-03 to engage Nokia in the multibillion-dollar R&D arms race that multimedia development demands. As a result, the multimedia margins of Nokia surged to 18.4% from 13.7% in a year. The complex and rather expensive smartphones of the multimedia unit yielded 323 million euros in operating profits during the first quarter, up 108% in a year and about one-third of the 1.085 million euros brought in by the mobile phones unit. Nokia finally has something that most big-cap companies lack: a new division making up more than 15% of total revenue, with profit growth topping 100%.
thestreet.com
Like Tero, I'm as excited about the high-end (and new mid-range smartphone models) as the low end, and the sleeper is the Enterprise Solutions Group and the new Eseries products they are bringing to market starting NOW! (finally), and I'll probably pronounce Nokia fully recovered when that division becomes profitable, which hopefully will be within one year from now under the direction of OPK, but I'd really like to see some progress in network margins as well. As Tero noted yesterday ...
Nokia's mobile network results were awful. Not quite the disaster that Motorola's network unit was, but pretty stiff competition. Revenues up 19%, but profit down 33%. Infra margins plunged from 15% to below 9%. Is Ericsson really sucking all the oxygen out of the network market? Or is there a soft patch?
[Edit] Haven't read it yet but I notice that Tero has a new posting titled 'Infra Scare Unfolding' up on RealMoney, and I suspect he is commenting on Ericsson (ERICY). I have some sector concern here (and Tero may as well). Handset sales are truly "trrrrific!" and so are wireless ICs. The problem I see is that for full sector health, Handsets, and Infra, and Chips, ALL need to be
Moi?
It looks like I left a little money on the table when I took considerable profit (+75% exclusive of last years dividend) by reducing 50% at $21.25 a few weeks back, passing up the dividend on those shares, but I'll be buying on a dip during the dog days when carriers and retailer executives. and brokers, are frolicking up and down the Côte d'Azur.
This looks to me like it is going to be a fine Nokia year. The products being released in Q2 are exceptional and when fully ramped should put Nokia in great shape for Q2 and Q3. In his yesterday report Per Bear Lindberg expressed concern about Nokia's inventory build which I view as a positive because that's new fresh product readying to ship in volume. We haven't seen the new product that will soon lunch behind that -- but we will. Nokia ALWAYS goes into the Q4 Blitzkrieg with guns fully loaded, the engine firing on all cylinders, and new treads on the tank. I expect no less this year. Nokia has come a long way in the last two years since that dismal Q1 2004 report. Whoopee!
You?
What think thee, other than "trrrrific!" ????
Best
- Eric - |
