Lumia Lights Up Nokia Stock

by Tom Taulli | January 10, 2013 3:59 pm

Lumia Lights Up Nokia Stock

As unthinkable as it might be, Nokia (NYSE:NOK[1]) might actually be the rare exception — a tech turnaround instead of a tech value trap.

If so, it will have the Lumia to thank.

According to a press release today[2], Nokia shipped 4.4 million Lumia units in the fourth quarter, and 6.6 million smartphones overall, marking the first time in a year[3] that the company’s smartphone shipments improved.

Wall Street was blown away by the news, and traders were bidding up NOK shares nearly 20% with less than an hour left before Thursday’s close; its nearly $4.50 share price represents 150% gains since the stock hit decade-long lows below $1 in July.

Nokia’s financials appear to be improving. The company now says that Q4 saw “underlying profitability” — a sign that the company’s cost-cutting initiatives are making an impact. That’s important considering Nokia has suffered losses for six consecutive quarters.

As I recently pointed out[4], the major carriers like AT&T (NYSE:T[5]) and Verizon (NYSE:VZ[6]) want a third alternative to Apple‘s (NASDAQ:AAPL[7]) iPhone and those running Google‘s (NASDAQ:GOOG[8]) Android — predominantly because the carriers then would have better leverage to set more favorable terms on handset prices.

It looks like Nokia might have produced that viable alternative[9].

The Lumia 920, which came out in November, has a high-quality screen and a top-of-the-line camera. Nokia’s relationship with Microsoft (NASDAQ:MSFT[10]) also has been important as the company has continued to innovate the Window Phone 8 platform. Best of all, Nokia has been aggressive on the pricing, which has gotten the attention of consumers — especially overseas.

On the conference call, CEO Stephen Elop indicated that there will be more ramping-up of shipments; usually, when a phone catches fire, that fire sticks around for a while. In this case, Lumia actually looks like it has the opportunity to become a standout brand in a world with very few standouts.

Also going Nokia’s way is the company’s long history of global sales and a strong presence in Asia. Its healthy relationship with China Mobile (NYSE:CHL[11]) — a company currently being courted[12] by Apple (NASDAQ:AAPL[7]) CEO Tim Cook — likely will be a powerful boost for revenues.

Nokia started its red-hot run at dirt-cheap valuations … but even though the price has ballooned a bit, it’s still looking attractive at a price that’s just 0.33 times sales. Sweetening the deal further is a 4.4% annual dividend yield.

Taking on Apple, Samsung (PINK:SSNLF[13]) and the rest of the horde seemed near-impossible for Nokia, but Lumia’s strength is starting to look legitimate and NOK’s attention to its costs and structure are paying off. It very well could be headed even higher.

Tom Taulli runs the InvestorPlace blog IPO Playbook[14], a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook[15]” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders[16].” Follow him on Twitter at @ttaulli[17]. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. NOK: http://studio-5.financialcontent.com/investplace/quote?Symbol=NOK
  2. press release today: http://press.nokia.com/2013/01/10/nokia-exceeds-previous-q4-2012-outlook-for-devices-services-and-nokia-siemens-networks/
  3. the first time in a year: http://blogs.wsj.com/digits/2013/01/10/did-nokias-newest-lumia-boost-smartphone-sales/?mod=yahoo_hs
  4. recently pointed out: http://investorplace.com/2013/01/should-i-buy-nokia-3-pros-3-cons/
  5. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  6. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ
  7. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  8. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  9. viable alternative: http://blogs.wsj.com/digits/2013/01/10/did-nokias-newest-lumia-boost-smartphone-sales/?mod=yahoo_hs
  10. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  11. CHL: http://studio-5.financialcontent.com/investplace/quote?Symbol=CHL
  12. currently being courted: http://investorplace.com/2013/01/thursday-apple-rumors-tim-cook-talking-to-china-mobile/
  13. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  14. IPO Playbook: http://investorplace.com/ipo-playbook/
  15. How to Create the Next Facebook: http://www.amazon.com/gp/product/1430246472/ref=s9_simh_gw_p14_d0_i1?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=center-3&pf_rd_r=0GRB6ZMCTYDZVNG7Q7NV&pf_rd_t=101&pf_rd_p=470938811&pf_rd_i=507846
  16. High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders: http://goo.gl/pR2F3
  17. @ttaulli: https://twitter.com/ttaulli

Source URL: http://investorplace.com/2013/01/lumia-lights-up-nokia-stock/
Short URL: http://invstplc.com/1fvT8Sr