Nokia Corporation has been one of the best performing stocks recently. Since late July, shares of the ADR are up approximately 70%. Just when nearly everyone thought the company was dead, the stock has surged in value. Some analysts think that the stock has more room to move. From a quantative perspective, the stock is cheap with a price over book less than one, an enterprise value of approximately 40% of market cap etc. But what about the qualitative aspects? Some analysts think the stock is going to continue its recent rally. ABG Sundal Collier has been bullish on the stock when all the other analysts were talking about bankruptcy. They note some catalysts, which can push the stock even higher. Below is a summary of their basic assumptions:

Nokia smart phone shipments windows and symbian

Though Nokia Corporation (NYSE:NOK) (BIT:NOK1V) chose not to divulge the identity of customers at last week’s press conference, it appears increasingly clear from a series of reports (see e.g. Bloomberg News) that a number of prominent customers, notably AT&T Inc. (NYSE:T), Deutsche Telekom AG (ETR:DTE) (FRA:DTE)’s TMobile, Verizon Communications Inc. (NYSE:VZ) and EE in the UK have struck exclusive sales agreements with respect to Nokia’s fresh Lumia family. The latest piece of news, emerging this morning (see poweruser.com), singles out China Mobile Ltd. (NYSE:CHL) as another leading service provider which will market and promote Nokia’s WP 8 devices. While no mention is made of either release dates or volumes, we infer that the world’s largest carrier by subscriber count (~700m users) – which has yet to get access to any iPhones – is very keen to enrich its 3G/2G (TD-SCDMA/GSM) portfolio with Nokia’s flagship Lumia 920. They envisage a rapidly growing roster of service providers embracing Nokia’s fresh batch of Microsoft Corporation (NASDAQ:MSFT) Windows Smartphones, which may soon be complemented with its first tablet, which capitalises on a comprehensively improved Microsoft Corporation (NASDAQ:MSFT) eco-system (Windows 8/Windows Phone 8) and which employs Navteq as the mapping technology of choice. Nokia, in their view, is placed to regain unit share and restore profitability in smartphones from the end of 2012/start of 2013.

Leading operators in China, Europe and the USA give their stamp of approval to Lumia 920/820

The central question to them is no longer whether Nokia Corporation (NYSE:NOK) (BIT:NOK1V)’s Windows Phone 8 portfolio will attract the attention of operators or whether it will induce a new wave of demand – it most certainly will as evidenced by documented traction with top carriers in China, Europe and the USA – but rather how quickly the supply chain can adjust to a surge in order bookings. Nokia Corporation (NYSE:NOK) (BIT:NOK1V), after all, may elect to expand production in a controlled and measured fashion – it may be taken aback by the level of operator interest amid heightened concerns about the consequences of acrimonious Apple Inc. (NASDAQ:AAPL) – Google Inc (NASDAQ:GOOG) (Samsung) legal disputes. The timing of the ramp up makes any near-term forecasts, Q4 2012 in particular, fraught with exceptional uncertainties. Even so, they believe that Nokia’s Windows Phone 8 devices will reach quarterly volumes in excess of 10 million units in the next 6 months with twice that rate attainable in the autumn of 2013 following release of a complete low-mid-high-end portfolio (in their view). This is exactly what Microsoft Corporation (NASDAQ:MSFT) seeks to achieve: Nokia has been “recruited” to join Windows Phone as a “special partner” possessing key technology, the distribution capacity and prowess of supply chain logistics to broaden the reach of the devices. They continue to expect that Nokia in short order will present its first tablet which is likely to be powered by ARM’s design and which is poised to re-utilise a number of features which sets the Lumia 920 apart (pureview imaging, augmented reality, supersensitive screens). The situation today is far more satisfactory than a year ago. To quote them, ‘Nokia Corporation (NYSE:NOK) (BIT:NOK1V) is soon back in the game.’

 

Disclosure: No position in any securities mentioned

Tags: