At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.
But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
And speaking of the best ...
Citing competitive threats from Apple (Nasdaq: AAPL) and Research In Motion (Nasdaq: RIMM), stock shop AmTech Research downgraded shares of Finnish cellphone maker Nokia (NYSE: NOK) yesterday. According to the analyst, "Apple and RIMM will win at the high-end [of the smart phone market] and ultimately move into lower price points ... [boxing Nokia into] a prolonged down margin cycle."
AmTech proceeded to unleash a slew of numbers on us, arguing:
About 7% of [Nokia's] unit volume or 31 mil in 2007 was at the $300 or higher price point, representing ~15-20% of handset sales and 20-25% of gross profit dollars. The threat is now meaningful with [Research in Motion's] 2008 units expected at 25mil, [Apple's] iPhone at 11mil... Furthermore, every 100bps [that Nokia loses] in handset operating margin corresponds to ~$0.10 EPS for the full year.
Dang, these guys are smart! I have to admit that when I read through that, I found myself feeling a bit intimidated by AmTech's undeniable smartitude. The analyst has clearly given this downgrade a bit of thought -- but what do AmTech's own numbers look like?
Let's go to the tape
Turns out, not so good. AmTech's a decent analyst, but its 74.52 CAPS rating, and its record of getting just a few more picks right than wrong, hardly has me feeling ... well, intimidated anymore. Consider in particular its record in the consumer electronics sphere:
|
Company
|
AmTech Said:
|
CAPS Says
(5 Max):
|
AmTech's Pick Beating S&P by:
|
|
Research In Motion
|
Outperform
|
***
|
11 points
|
|
Broadcom (Nasdaq: BRCM)
|
Outperform
|
***
|
11 points
|
|
Apple
|
Outperform
|
****
|
2 points
|
|
Qualcomm (Nasdaq: QCOM)
|
Outperform
|
****
|
1 point
|
OK, not bad. But then again ...
|
Company
|
AmTech Said:
|
CAPS Says (5 Max):
|
AmTech's Pick Lagging S&P by:
|
|
SanDisk (Nasdaq: SNDK)
|
Outperform
|
****
|
33 points
|
|
SiRF Technology (Nasdaq: SIRF)
|
Outperform
|
****
|
60 points
|
That is bad -- horribly bad. Consider, too, that the last time AmTech slapped a rating on Nokia -- the "buy" rating that it just removed -- its recommendation proceeded to underperform the market by a good 16 percentage points.
What now?
By this point, I'm decidedly unimpressed with AmTech's record generally, and its record on Nokia in particular. That's particularly true when I notice that at today's price, Nokia sells for a mere 8.6 times trailing earnings, and 10 times trailing free cash flow -- versus consensus analyst growth estimates of 12% long-term.
It's been years since Nokia was selling this cheaply, and the last time we got down near these levels, investors in Nokia reaped rich rewards. Follow AmTech's advice today, and I fear you'll miss out on those rewards tomorrow.
Closed for 15 months – opening 10 days only! Get notified ahead of time as our expert portfolio manager invests $1 MILLION in the best opportunities from across The Motley Fool’s premium investment services. This is the first open since August 2008, by invitation only. Enter email below.
Terms & Conditions
RSS Headlines
Fool UK