The Tale of the Tape ...
With only four trading days left in 2006 perhaps we should take a peek at how NOK and the other large cap, blue chip, market leaders and challengers in mobile wireless handsets, infrastructure, and wireless ICs treated us this year and last ...
'06 CYTD¹ 1 Year¹ 2 Years¹ ¦ 2005³
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Ericsson ERIC +17.30% +17.40% +28.14% ¦ +9.24%
Nokia NOK +10.38% +9.25% +28.99% ¦ +16.78%
======================================================================
S&P 500 +13.02% +11.25% +16.63% ¦ +3.00%
Nasdaq +8.89% +6.75% +11.14% ¦ +1.40%
======================================================================
Motorola MOT -10.31% -12.90% +16.17% ¦ +31.34%
Texas Instruments TXN -10.98% -12.74% +19.51% ¦ +30.26%
QUALCOMM QCOM -12.23% -14.82% -14.92% ¦ +1.60%
·
¹ As of 12/22/2006 Close:: Reuters ProVestor Plus Company Reports
² 12/31/2004 Close to 12/30/2005 Close: Reuters ProVestor Plus Reports
Sisuman,
<< From an optimistic Q1 to a Q4 "Wall of Worry". Back on 4/22 I rendered an optimist's view for NOK, implying a possible year-end stock value of $29 to $32 - but also cited that view as being scary, since it was based on the strong first quarter EPS report. Now NOK's stock struggles to hold a price around $20.50, having encountered a that wall of worry ... >>
I had a less optimistic view, at least for the short haul and on April 1, I commented ...
Techs are enjoying a nice run but personally I took down NOK 50% on Thursday at $21.25, CSCO down 50% at $22 on Friday, QCOM down 50% at $49.86 a few weeks back, TXN down 50% at $32.50 late last year ... These could all run higher into earnings and even beyond but I'm content to pocket substantial profit, and I think we'll see a tech pullback in summer.
Specifically in re NOK on April 21 I added ...
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.
Despite my somewhat contrarian view, I think your 4/22 optimism was justified at the time you presented it. Techs were hot, wireless sector sentiment was positive, and it was obvious that handsets would enjoy another stellar unit sales year, well above the cautious estimates at year end 2005 ...
... but sector sentiment cooled quickly, and at best it could be rated Neutral today, with semis cool.
ERIC, who bumped QCOM out of the 2 slot for market cap this year, was obviously the big winner and was the only market leader in wireless sector whose share value increased since you presented your optimistic NOK view, but given sector sentiment as it exists today, NOK has performed credibly, if not spectacularly for the second consecutive year. They've clawed back more handset share, and they retain industry leading handset margins.
Here's the share prices of the sector market leaders on 4/22, ordered by today's market cap, the prices at last Friday's close, and the gain or loss since 4/22 ...
04/22/06 12/22/06 +/- '06 Trading Range Market Cap.
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Nokia NOK $22.88 $20.20 -11.7% $17.65 - $23.46 $81.000 Bil
Ericsson ERIC $35.37 $40.35 +12.3% $28.88 - $41.14 $69,331 Bil
QUALCOMM QCOM $51.39 $37.81 -26.4% $32.76 - $53.01 $62,483 Bil
Motorola MOT $22.07 $20.26 -8.2% $18.66 - $26.30 $48,978 Bil
TI TXN $28.55 $35.34 -19.2% $26.77 - $36.40 $42,365 Bil
<< Is Nokia's near-term future really that scary? >>
You did a nice job in presenting your bakers dozen tick list of challenges facing Nokia that at the moment are capping the relatively tight range NOK is trading in.
I'd add two more items to the list, and one is the CDMA ramp down that will occur in 2007 which will have to be compensated for with GSM/3GSM models, and uncertainty about Nokia's ability to improve share in the US next year.
A little smoke has to clear before some of the items you flagged will become less of a concern, but there is a new terminal platform on its way, and that's a real positive.
<< 13. An overall analyst disappointment in the Amsterdam presentations - nothing new and highly positive. >>
I was encouraged by Amsterdam even though Nokia did not open the kimono very far. Expectations of what they would reveal were modest. On November 16 Tim Luke and Stuart Jeffrey of Lehman Brothers published a Nokia Update titled "CMD Unlikely a Catalyst" ...
"We do not expect Nokia to offer any major new themes at its Capital Markets Day in Amsterdam on Nov 28/29 and thus consider the event unlikely to prove a significant catalyst for the shares."
On November 29, however, they were somewhat more positive when they published an update titled "CMD Exceeds Modest Expectations" ...
"Yesterday, Nokia senior management gave a confident presentation around the key challenges facing the industry and company and how Nokia plans to address these. Margin guidance was cut slightly, but remains above consensus levels, while our estimates remain unchanged [their 2007 EPS estimate remains €1.13 / $1.42]. A key positive in the presentations was management’s apparent dynamism and confidence in gaining share and improving margins. ..."
On December 19, they published a "Wireless Equipment Industry Update" and their sentiment mirrors mine ...
"From the point of the view of Nokia’s shares, we continue to see compelling value. With the stock trading on 13.6x non cash adjusted 2007 EPS estimate, we see limited downside risk, although clearly, upside catalysts may take a few months to come through. Following the company’s Capital Markets Days last month, we think a key positive was management’s apparent dynamism and confidence in gaining share and improving margins. While noting continued pressure on ASPs and gross margin, we expect to see a material improvement in Nokia’s competitive position, in 2H07, in the mid-range in particular."
If I were an analyst I'd rate NOK a Hold at the moment, and absent better visibility on the evolved product line I'd want to see NOK's share price down $1 to $2 before I'd consider accumulating. I'm particularly concerned about Q1, simply because the mid-range refresh hasn't begun, although if they can get the Nokia 6300 in play early in Q1 and ramp it quickly they should be able to hold there own until new terminal platform products come on stream. We should have a clearer picture of how the product refresh will shape up by end of Q1 (CES, 3GSM World Congress, CTIA Wireless). Beyond Q1, I'm reasonably positive about 2007, although hopefully the Nokia Siemens Networks formation will be finalized by quarters end.
Thanks for posting your sentiments ...
Happy New Year,
- Eric - |
