Actually, Nokia's (NOK) Q4 and FY results were not bad. For the quarter Nokia posted adjusted diluted earnings of €0.08 per share (about $0.11), that compares very favorably with the Thomson Reuters consensus estimate for EPS of $0.04. The consensus estimates do not include the handset business as a discontinued operation.
So why did the stock tank?
One reason are market conditions. The market is more than likely in correction mode. And if you ask me, this will not be a simple correction, but may last a little longer than what investors were use to the last couple of years.
Many investors were a little disappointed by the lack of vision from management, and the fact that the company did not provide much guidance. Oh yes, management did not provide enough clarity for the future either. But the damage from this is miniscule if you ask me.
If you really want to know why I think Nokia tanked, the answer lies in the article I wrote the day before Nokia's results came out (please consider: Why Nokia Is Dead Money). And the reason for the big correction, is that Nokia is not a cheap stock.
The only way for Nokia's stock to have gone up yesterday, was if it surprised everyone, by a lot more than it did. Because other than, there was only one way for the stock to go, and that was down (my opinion).
So now that the stock tanked, is it the end of the world for shareholders? The answer is no. Similar to BlackBerry (BBRY), investors have to understand that Nokia is still in turnaround mode and the turnaround is still in its early phase. As a result, they cannot have very high expectations. In fact, Nokia has already rallied more than it should have if you ask me. So a correction way was in order, even though it beat estimates.
Second, the good news is that most of the correction happened in one day, so it will not be Chinese water torture from now on. In fact, you might even want to dip a little into the stock if you don't have it.
So how much is Nokia worth? If you ask me currently around $6 - $7. Can it go below that? Sure it can. If we see a broad market correction and if sellers persist, Nokia might even go to $6. But even if you buy it at that level, $8 a share is probably all you're likely to get in my book. In fact, for the next two years or so, I see no reason for Nokia to trade above that price.
So what should you do? My recommendation is to do the same as I have told you to do with Intel (INTC), Cisco (CSCO), Oracle (ORCL) and even IBM (IBM). That is, to swing trade them. Yep, I think you are better off swing trading Nokia -- and the previously mentioned stocks -- for the foreseeable future, than buying and holding them. The upside top in all of the above stocks is not very high -- especially in Nokia -- and I think it would be better if you became a more active investor (AKA trader).
Because unless you are only interested in a dividend (and I have no quarrel with investors who simply want a dividend), making any money is these stocks will be very hard to do in 2014. The market will not be very generous to investors this year, and investors have to do a little more work on their part.
And by a little more work, I mean swing trading these stocks in and out on a weekly and monthly basis. Because if you have a capital gains strategy, then you will have to get your hands a little dirty this year and trade these stocks up and down.