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On January 23, Nokia (NOK) will report earnings excluding revenues from its devices and services business, and for the first time, it will disclose its financial outlook for its new intellectual property Advanced Technologies unit. The new format should make it easier for investors to understand the company.

I keep reading articles about Nokia's patents, about the potential for patent revenue and how great the company's technology is. All this is fine, however many investors get caught up in the nitty gritty of the company and often miss the big picture, which is none other than the valuation of the company itself.

In Nokia's case, the question at hand is not the company's technology, but to what extent (and if) the current stock price reflects many of the recent developments, and what the potential for profit is looking forward.

Excluding the D&S segment, which will be reported as a discontinued item, JPMorgan analyst Sandeep Deshpande estimates Nokia's 4Q13 group sales at 3.3 billion euros ($4.4 billion) and group EBIT at 438.2 million euros ($590 million) with EPS at 0.06 euros.

The average analyst consensus is more or less along the same lines. For 2014, analysts believe Nokia will make $0.22 per share and for 2015, the figure is bumped up to $0.32 per share. As for group revenue, if analysts are correct, sales will come in at around $18 billion in 2014, and just shy of the same figure in 2015. For starters, that means zero revenue growth.

Now let's look at the fundamental valuation of the stock. If analysts are correct, Nokia currently trades at a forward P/E of about 35. In addition, Nokia currently trades at a forward Price/Sales ratio of 1.6, when Ericsson (ERIC) trades at around 1.

In addition, the 12-month analyst price target consensus is around $7.88 a share. So if analysts have it right, buying or holding onto Nokia will not make you much.

My question is, what can make Nokia a buy if analysts are right? My answer is almost nothing. I will agree that the company is now on better financial footing, and I will also agree that NSN has a bright future. I will even throw in the benefit of a doubt and say that Nokia will surprise to the upside tomorrow.

But in order for Nokia to be able to go up from these levels, it needs to surprise to the upside by a lot in my book. The main reason for this is that while EPS is expected to increase by 2014 and 2015, even if analysts are right, Nokia will still not be a cheap stock. I will not even mention that revenue growth is expected to be zero.

Several days ago, Raymond James downgraded Nokia from Market Perform to Underperform with a $7 a share fair value. I will say I agree with this rating.

I was a lot more bullish on Nokia at the bottom when it was a turnaround situation play and had a good chance of doubling. Since then it has turned around and has more than doubled since then. However, now that it has turned around, it is fully valued by my standards. And while it's a great company, I don't think investors will make much money buying Nokia today at these levels.

Bottom line

While Nokia is a great company, you will not always make money buying a great company. Intel (INTC) is but one example. Because at the end of the day, the criteria for buying any stock is its valuation and future prospects. For long-term minded investors I would recommend Apple (AAPL) instead of Nokia any day of the week.

I do not recommend shorting Nokia, but I do not recommend buying it either. At current levels, I think it is fully valued. For me, there are many more fish in the ocean that offer the chance for capital appreciation, and I think Nokia is not one of them.

Source: Why Nokia Is Dead Money