nokia corporation pacific crest earnings model

Nokia Corporation (ADR) (NYSE:NOK)’s stock has been soaring lately, but overly optimistic news flow may be driving the stock. The optimism may have been driven by an overly optimistic interpretation of initial Lumia sales commentary.

Pacific Crest Securities note that their recent channel checks in North America and Western Europe indicate Nokia Corporation (ADR) (NYSE:NOK) (HEL:NOK1V) (BIT:NOK1V) sales volumes that are quite low, while initial shipment volumes are similarly low. They estimate that the company is tracking toward shipping roughly 1 million new Windows 8 products in the December quarter, while it looks likely to sell through roughly half of those units, based on current run rates.

Marginal improvement versus last year driven by legacy models

Relative to Nokia Corporation (ADR) (NYSE:NOK) (HEL:NOK1V) (BIT:NOK1V) Lumia sales at this time last year,overall Lumia volumes are marginally better on a run-rate basis primarily due to having older Lumia models and lower price points available. On a like-for-like basis (new 920 and 820 in 2012 versus 800 in 2011), Pacific Crest estimates that sales are similar or even slightly lower year-over-year.

Back in mid-November, Bloomberg cited the rise in Nokia Corporation (ADR) (NYSE:NOK) (HEL:NOK1V) (BIT:NOK1V) shares as being driven by reports that the Lumia 920 had seen strong demand in Germany. While this may have been the case for a few thousand initial units, Pacific Crest channel checks indicate that retailers in Germany say they are only now beginning to receive the 920 across normal sales channels, and the volumes being received are still very small.

The analysts believe there is some initial pent-up demand that is resulting in stores selling out of initial shipments in a few days. Nevertheless, they believe that this is largely to do with the low shipment volumes rather than surprisingly strong demand.

A somewhat similar dynamic is likely going on at AT&T Inc. (NYSE:T) for the 920. Based on the inventory on hand, the analysts believe that AT&T Inc. (NYSE:T) is selling only 10,000 to 15,000 Lumia 920 devices per week at the moment. The analysts’ theory is that stores are able to sell available stock in a few days; however,  they believe most stores getting only a handful at a time.

Furthermore,  they believe that a $50 lower price than the 920 is not proving to be incrementally more compelling. In Europe meanwhile, they believe that extremely aggressive prepaid and postpaid deals on the legacy Lumia 610 and 800 models are cannibalizing new products, which sales representatives feel may be somewhat overpriced.