Mayukh Mukherjee's  Instablog

Mayukh Mukherjee
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Interested in technology and financial markets. Undergrad in engineering, MS in Comp Sci and an MBA in finance. Building tools for individual investors to make more informed decisions about the stocks and mutual funds they choose. Investment style: Identify businesses that have long-term... More
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  • Dumpster Diving Series: Nokia Looks Enticing But Wait For Those Lumias To Sell First 3 comments
    Nov 8, 2012 9:14 PM | about stocks: NOK

    Our Recommendation: Wait for a couple of quarters to see if Nokia handset sales stabilize (they seem to be in free fall right now) and if customers are adopting the Windows mobile platform.

    Fair value Estimate: $3 - $5

    See valuation details below

    Stephen Elop has been in charge for over 2 years now and has seen the stock slide over 70% during his tenure. Ten's of thousands of jobs have been lost and more to come in the near future. But then the seeds for Nokia's current woes were sowed more than 5 years ago when it failed to recognize the huge tidal wave of smartphone adoption across the world. Samsung (KR:005930) is a good example of a company that hung in there with Apple and has really adopted a fast follower approach .

    5 Year Total Return

    005930 - Samsung Electronics; TW:2498 - HTC Corp. Not traded on US exchanges

    1 Year Total Return

    005930 - Samsung Electronics; TW:2498 - HTC Corp. Not traded on US exchanges

    Nokia's current strategy of betting its future on the Windows ecosystem is a risky one, though one could argue its choices were limited. The reality is that even if Windows mobile is a success there is going to be competition from other manufacturers. In fact a quick glance at the picture below shows that the Lumia 920 has strong competition starting right out of the gates.

    The hope must be that in partnership with Microsoft they would have a competitive edge in chipping away at the blackberry's stronghold in enterprise mobility.

    Valuation Details:

    2012, 2013 estimated revenues of roughly 37 billion USD with negative margins and then a slow recovery in 2014. This is a conservative forecast. For example, negative earnings will help reduce tax outlays for the years ahead and increase free cashflows.

    If you'd like a quick and easy way to do intrinsic valuations sign up here -- We're launching a series of tools for value investors to screen and value stocks.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: NOK
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Comments (3)
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  • akoshi
    , contributor
    Comments (88) | Send Message
    first of all, the stock is hardly in free fall and to qualify it as that is misleading. Nokia has been around the 2.50-3.00 range for the last 4 months. If you want to see free fall go search AAPL. Second, you base your entire analysis of the stock on only one segment of Nokia.
    Not once did i see you mention Nokia Siemens or Navteq which are gonna be bringing in alot of profit this coming year


    plus, like we saw last january and have seen every new year, the market will rally for a couple months and then readjust as people take their gains. Anyone who can grab NOK at 2.50-2.70 will make good profit
    8 Nov 2012, 10:18 PM Reply Like
  • Mayukh Mukherjee
    , contributor
    Comments (17) | Send Message
    Author’s reply » Thanks for the comments. I did not call out specific segments of their business as I put my assumptions in the dcf analysis. We are in agreement that the stock has tremendous upside.


    My only concern is that its an all or nothing strategy with Lumia and Windows 8. And I when I mentioned free-fall I specifically was talking about handset sales. They are down double digits in every quarter.


    9 Nov 2012, 09:03 AM Reply Like
  • akoshi
    , contributor
    Comments (88) | Send Message
    Windows 8 will catch on. Even if in the American market, it might not be the next Iphone, I am willing to bet that windows smartphones will be popular in the rest of the world. Europe and Russia especially and then the Asian countries which could never afford any apple products and have probably never even heard of apple. If you've ever traveled through europe then youll agree with me that the average person in countries like Greece, Italy, Albania, Germany will have more than 1 phone and every phone i've seen in these countries was a nokia. Sure i'd spot an iphone or an android here and there, but the majority of people have nokia's and i expect this trend to follow.


    The way i see it is that by Q4 results and the Q1 results, nokia will be making profit. Maybe it wont be revolutionary, however any profit with this stock at this price will push its share price up and people will profit. Another thing, in a broader perspective, once legislation passes for the Fiscal cliff coming in December, expect the entire market to soar up like it did at the beginning of 2012. I am not joking that i profited over 30% throughout the board on all my investments just because of that fact.


    Just my 2 cents.
    12 Nov 2012, 08:44 AM Reply Like
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