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In the last couple of weeks, the analyst activity regarding Nokia (NYSE:NOK) has been interesting. It looks like several analysts have raised their earnings estimates for the company while reducing their price target simultaneously, which can confuse a lot of retail investors.

Of the 16 analysts covering Nokia, 7 increased their earnings estimates in the last couple of weeks. For the current year, the analysts expect Nokia to generate $32.14 billion in revenues (ranging from $30.50 billion and $34.28 billion) and $0.04 per share (ranging from -$0.11 to $0.21) in earnings. For 2014, the analysts expect Nokia to generate $0.13 per share (ranging from -$0.13 to $0.34) on revenues of $32.54 billion (ranging from $29.50 billion to $41.00 billion). Previously, the analysts were expecting Nokia to generate $0.02 per share this year and $0.12 per share next year. Notice that the lower end of the estimates didn't change much at all; however, the higher end of the estimates changed sharply since the last time. Earlier, the higher end of estimates was calling for $0.16 per share for this year and $0.25 per share for next year. While the bearish analysts stayed bearish, as would be expected from them, the bullish analysts surely got more bullish.

Unfortunately, this didn't reflect in the target prices though. The average analyst target price is $3.45 which is down from $4.00 earlier as well as the current price of $4.15 per share. In fact, today's share price indicates a premium of 20% over the average analyst estimate. Keep in mind that the average analyst estimate was brought down significantly by a bearish analyst who sees Nokia's fair price at $1.56. If we look at the median price target instead, we get a number closer to $5.00, which means that the current share price is cheap. After all, considering how Nokia has $3.41 per share in cash alone, it is ridiculous to value it at $1.56. This must be one analyst that truly hates Nokia.

In fact, a quick Google search reveals that the $1.56 price target belongs to Bernstein who said they thought that Nokia was pretty much dead last year and didn't upgrade its price target since last summer. I guess Bernstein was asleep at the wheel in the last year as Lumia became one of the hottest phones in the world, posting double-digit growth for the last few quarters. Maybe it's time for Bernstein to wake up, smell the coffee, realize that Lumia is far from dead and update its price target to a more reasonable number.

The number of "buy" or "strong buy" ratings jumped from 3 to 4 and the number of "strong sell" or "sell" ratings fell from 10 to 8 in the last month. This is a tiny but notable improvement. Historically, the analysts haven't been very accurate with Nokia in the last couple of years, but that's somewhat understandable, given the company's high volatility during this period.

This coming holiday season will tell us a lot about Nokia's future. Currently, momentum is with Lumia as it continues to grow at a rapid rate; however, Nokia's feature phones are seeing sharp declines. If the company can pull the holiday season off with strong numbers, this will attract a lot of new investors and urge many analysts to become more bullish on the company. If the company fails to impress in the holiday season, this might set the tone for the next year. The latest indicators show that the recession in Europe might be over, which is great for Nokia, because Europe is the biggest market for the company in terms of both volume and revenues. Before the European recession, Nokia was generating two-thirds of its revenues from Europe, which means a strong European economy can help Nokia take off. Currently, the company only generates one third of its revenues in the continent which could be the result of the recession in the continent.

As I mentioned in my last article, I don't like the idea of Nokia building a tablet before its phones return to strong profitability (by strong profitability I mean sustainable double-digit margins). Currently, Nokia relies on its NSN (Nokia Solutions Networks, formerly known as Nokia Siemens Networks) for its profits whereas the company's phone and mapping businesses are not that profitable. I hope that this will change in the holiday season and Nokia will have a strong year in 2014.

Source: Nokia: Analysts Are Upgrading Their Estimates