Foolish Forecast: Neglect Nokia at Your Own Peril

Thursday morning, waaaaay before the markets here open, Finnish mobile phone mogul Nokia (NYSE: NOK  ) reports second-quarter earnings. Check out fellow Fool Tim Beyers' take on the first-quarter report before you get back to this update -- which has a much happier ending.

What Fools say:
Here's how Nokia's CAPS rating stacks up against some of its peers and competitors:

Company

Market Cap (billions)

Trailing P/E Ratio

CAPS Rating (out of 5)

Apple (Nasdaq: AAPL  )

$151.4

35.4

****

Nokia

$94.8

8.3

****

Research In Motion (Nasdaq: RIMM  )

$60.5

39.6

***

LM Ericsson Telephone (Nasdaq: ERIC  )

$35.0

11.0

***

Motorola (NYSE: MOT  )

$15.3

N/A

**

Data taken from Motley Fool CAPS on 07/15/2008.

CAPS player bzhayes notes that Nokia is a "tech stock with a p/e under 10 and dividend over 3%.... great time to buy." Other bullish players like the company for its strong balance sheet, massive global footprint, and again for the ridiculously low share price.

The bears feel pressure from Apple's iPhone, and MARALB83 doesn't see "a clear alternative" to that gizmo in Nokia's lineup.

What management does:
Let's see here. The original iPhone was introduced in June 2007. Since then, Nokia has expanded its gross margin, revenue, and profits in an impressive show of market muscle. If the iPhone were really squeezing Nokia's pricing policies, at least the gross take would suffer.

Margins

12/2006

3/2007

6/2007

9/2007

12/2007

3/2008

Gross

32.5%

32.4%

31.9%

32.7%

34.5%

35.1%

Operating

13.0%

12.7%

13.9%

14.7%

13.9%

13.7%

Net

10.5%

10.2%

13.4%

14.1%

14.1%

13.8%

FCF/Revenue

9.3%

10.9%

11.6%

12.9%

14.0%

11.6%

Growth (YOY)

12/2006

3/2007

6/2007

9/2007

12/2007

3/2008

Revenue

20.3%

14.2%

16.3%

18.3%

24.2%

29.9%

Earnings

19.1%

11.5%

43.0%

61.8%

67.3%

75.8%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The bottom line is that Nokia goes after a much broader audience than Apple's entertainment-centric iPhone or the all-business, no-fun BlackBerry. The Finnish product line covers all bases and reaches pretty much every market on this little globe of ours. Until every first-time cell phone owner in Ulan Bator and Ouagadougou needs a touch-screen smartphone that plays videos and connects to Oracle (Nasdaq: ORCL  ) databases, Nokia does not need to panic over the rise of the iPhone and friends. And by then, I'm betting that there will be a suitable Nokia model to fill that need. Maybe even 10.

I have to agree with the CAPS players who see incredible value in this beaten-down tech giant. The shares slid around 30% lower over the last six months, far worse than the S&P 500 benchmark's roughly 12% loss. Someone out there is overreacting to the competition's shiny new gadgets, and you could make a mint on their mistakes.

Apple is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.Or just sign up for a free CAPS account to find the identities of your fellow Fools who were quoted above. They might have more to tell you!

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.


Read/Post Comments (1) | Recommend This Article (5)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 15, 2008, at 3:37 PM, martinfrosa wrote:

    I like them. I have always liked them and have been nicely rewarded. Nokia will crush everything in its path. Just ask Motorola.

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