Ever since Apple’s iPhone and Android smartphones came into the market, Nokia (NYSE:NOK)has lost quite a bit of market share along with the share prices. Similar to the Blackberry maker, Research in Motion (NASDAQ:RIMM), which was also a very popular option when smartphones were just coming onto the market. RIM has not been able to get back on its feet and management is very inefficient. The same can not be said about Nokia, however.
Nokia took a hit but they then regrouped and decided to launch more powerful, sleek phones that would interest consumers and so far, it is working. Nokia’s new phones are getting good sales out of the gate and the reaction from customers appears to be positive. Not to mention, management has said that new phones that are “even better” are expected to be out soon as well.
What exactly did Nokia have that made its comeback possible, unlike RIM? For one thing, Nokia is backed by Microsoft and if there is one company that can take on Google and Apple, it is Microsoft. Next, instead of going similar into iPhone and Android territory, they have decided to price their phone much lower which will help gain sales from people who are looking for a nice smartphone under $250. The fact that the operating system of Nokia’s phone are Windows, makes the phone more appealing to customers who may be a little uneasy from venturing away from the iPhone or Android.
Nokia is loaded with cash. The company has $8 billion in cash and investments, while RIM barely has a fraction of that in cash. Nokia may have a hard time beating Android and iPhone here in the United States but in the international phone market, Nokia’s low priced, high quality phones will prevail as customers abroad are looking for cheaper options.
Analysts are beginning to get behind Nokia’s rebound and raising forecasts. In fact, analysts are predicting that EPS will rise by 100% over the next year due to more products and higher demand. According to that EPS bullishness, that would put Nokia’s stock at 11 times EPS on a forward basis, with over a third of the value in cash. This was a similar valuation that Apple had back in 2008. Is Nokia the next Apple? Probably not but you can not deny the progress being made over at Nokia. Look for the shares to rebound over the next year or so.