Recently, analysts at Northland Securities reiterated their "Outperform" rating on shares of Nokia and lowered their price target from $10 to $8. Outperform? Shares of Nokia, at best, should be rated "Neutral". We are going to take a look at Nokia and you can decide if shares of Nokia are going to "Outperform."
Nokia Corporation provides telecommunications infrastructure hardware, software, and services worldwide. The company offers smart phones and smart devices; and feature phones, and related services and applications. It provides feature phones and smart phones under the Nokia brand; and mobile devices under the Vertu name.
We'll take a look at the financial performance; sales the past five years declined 1.2 percent annually while earnings declined 33 percent annually. This year earnings declined 163 percent and next year are expected to increase 131 percent. The next five years earnings are projected to grow at an annual pace of 1.9 percent. Research in Motion's (RIMM) earnings projection for the next five years is 6.5 percent.
Gross margin is 29.3 while Apple's (AAPL) gross margin is 42 percent and RIMM's gross margin is almost 36%. If it isn't obvious management is ineffective and inefficient, the return-on-equity is negative 8.9 percent.
However, Nokia is solvent and liquid and selling at 32 percent of sales. Then again, the market doesn't think the firm has good growth prospects because the firm is trading at roughly book value. The company does offer a 6.2 percent dividend.
Shares are trading below the declining 200-day and 50-day simple moving averages and breaking out to the down side. The stock is down 12 percent year-to-date and 50 percent in the past year.
A CNBC headline from April 11th reads, "Nokia Nightmare No Buying Opportunity"; we couldn't agree more with that headline. Hopefully, analysts at Northland Securities will come to their senses and change their rating to "Underperform."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
