Shares of Nokia (NYSE:NOK) dropped over 10% today as the smartphone maker lowered its earnings guidance for the year. Shares look cheap at just $8.77 per share. The stock trades at just 8 times forward earnings and 1.9 times book value. The balance sheet looks great with Nokia holding twice as much cash as long term debt. Nokia has nearly 40% of the company’s share price in cash alone. The company has a great dividend yield of 4.3%. The stock looks great from a financial perspective. So, what’s the problem? There is no growth at Nokia.
Nokia now expects growth to be flat for the entire year. Revenue is expected to come in on the low range of $8.2 to $8.8 billion dollars and operating margins are shrinking. While Nokia is still the world’s number 1 cellphone maker, the company is losing market share to competitors. Google, Apple, and Research in Motion have all developed much more popular high end products that customers love. Google’s android phones are a hit with consumers. Apple is selling a record number of iPhone 4g’s and RIMM still has the always popular Blackberry.
CFO Timo Ihamuotila admitted that Nokia is “experiencing greater-than-expected pressure, particularly at the high end of our smart phone portfolio.” Nokia reminds me of Palm but with a better balance sheet. Nokia needs to develop a new sleek high end smartphone to remain a relevant player in the smartphone market. Patient investors with a long term horizon may want to take a look at Nokia’s shares. If the company does develop a new smartphone, the share price would rise. In the meantime the stock may be worth holding for the dividend income alone.
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A young and savvy, yet experienced and accomplished investments mogul since ‘01; Michael has amassed a fortune as a private self investor. Recently starting his own successful blog and turning it in to a corporation — MIV Investments Inc., a company offering advice to thousands of people worldwide and attracting contracts from various reputable sources. His articles and publications have been linked to Forbes, CNN Money, Reuters, Bloomberg, and many other top worldwide mainstream media sources.
Michael Vlaicu
