Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) won’t release its third quarter earnings report until October, but analysts are already speculating on the results to be expected from the Finnish company’s numbers. The company’s stock has fallen on today’s market in the wake of a report from Sanford Bernstein that gave a pessimistic projection for the current quarter.
Pierre Ferragu, the analyst who authored the report, reckons that Nokia smartphones are still failing to connect with customers. That means a p0or quarter is ahead for the company, and a poor year may be ahead for the company’s investors. Sanford Bernstein rated the company Underperform in the coming year.
Nokia Windows Phone unpopular with consumers
Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has bet almost everything on the success of the Microsoft Corporation (NASDAQ:MSFT) mobile platform Windows Phone 8. The software is reasonably well regarded by critics, but consumers don’t seem to have been wooed just yet. The challenges are causing difficulties at Microsoft, but the failure hits Nokia particularly hard.
According to the report not only are Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) phones unpopular, they’re also worth less and less to the company. Marginal ASP, “incremental sales divided by incremental volumes, which is the money Nokia makes per incremental phone they sell,” has fallen rapidly since the company’s new phone launched.
Back then marginal ASP stood at 250 euro, now it stands at 80 euro. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is aiming more and more at the lower end of the market. That means that even if the company sells many more units, it is unlikely to be able to significantly increase its profits. Things aren’t looking good for the Finnish handset maker, and the coming quarter might be “disastrous” according to Ferragu.
50% price target
On its home market in Finland shares in Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) were trading at just over 3 euro today, down more than 2% on today’s trading. The report from Sanford Bernstein put a price target of 1.50 on the company’s stock, around 50% of it’s current price. If that prediction plays out Nokia investors have a tough year ahead.
Competition is increasing in the smartphone market and the overall market has become saturated as most consumers in North America and the Western world already own one of the devices. The market trends and the company specifics are both against Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) right now according to this report. The firm’s future is in the balance.