Nokia Corp (ADR) (NYSE:NOK) is quintessentially Finnish — beautiful, rugged, quirky and a bit tragic. Once considered the preeminent mobile phone platform, its reign was challenged briefly by BlackBerry Ltd (NASDAQ:BBRY), then permanently by Apple Inc. (NASDAQ:AAPL). Today, NOK stock is more than just a phone company, but will Wall Street care?
Its fourth quarter of fiscal year 2016 earnings report is set for release before the opening bell on Feb. 2.
Would-be buyers and traders have a tough call to make. We all love stories of the great comeback, and Nokia stock is a candidate. Shedding its legacy image as a boxy-cell-phone manufacturer, NOK stock has been extremely acquisitive.
We’re not just talking about the buyout of Alcatel-Lucent, although that is a big part of the story. It’s also the procurement of lesser known assets that will assert Nokia’s new role as a public networks provider.
At the same time, we’re talking about NOK stock here. Recently, InvestorPlace contributor Will Ashworth slammed Nokia stock as still being “a dog with fleas,” borrowing a line from the iconic movie Wall Street. It’s a fitting description of a company which has “delivered a scintillating annual total return over the past 15 years of -7.14%, more than 11 percentage points worse than the S&P 500.”
Whatever management has up their sleeves, they better get to it. The markets are many things, but patient usually isn’t one of them.
The Nitty Gritty of Nokia Earnings
Let’s take a deeper look at the Nokia earnings. The average consensus estimate for earnings per share is 8 cents — smack in the middle of the forecast spectrum. For the top line, analysts are predicting sales to come in a range of $6.8 billion at the low to $7.6 billion at the high, with a $7.2 billion consensus.
To say that the Nokia earnings environment is challenged is putting it mildly. First off, recent performances by NOK stock leave a lot to be desired. Fiscal 2016 is mostly a disappointment, with two misses and a narrow beat.
Unless Nokia is planning to pull the proverbial rabbit out of the hat, I’m not sure what they can do. The financials for Nokia stock aren’t exactly inspiring.
Not surprisingly, Zacks Equity Research prospects for Nokia earnings are dim. Their analysts rank NOK stock as a “sell,” citing a litany of problems. Chief among them is the patent war that Nokia finds itself embroiled in with Apple. After losing the mobile phone business to Cupertino, NOK has devolved into what InvestorPlace contributor Dana Blankenhorn calls a “patent troll.”
That’s all fun and games when you pester from your home turf. But Nokia seemed to forget the first rule of trolling: don’t troll those that can beat the crap out of you. Mighty Apple has had enough, and they’re going to leverage their 22:1 valuation disparity against Nokia.
Again, as Blankenhorn states, that forces NOK stock into a weak hand.
NOK Stock Is Wickedly Unpredictable
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What that tells you is that if you do intend to trade Nokia earnings, do so quickly and firmly. Trying to make up for losses usually results in an extension of those losses. And the markets do not make it easy. In the last three reports, Nokia stock was positive heading towards the earnings release. On the day of, NOK fell to an average of 6%.
For those who want to try their hand at a little Wall Street Russian roulette, a tip of the hat to you! For everybody else, I would just stay away from NOK stock. There are deep-seated fundamental challenges with the company that have yet to be adequately addressed.
Until that day comes, Nokia stock remains a liability.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
