Finnish mobile phone maker Nokia is set to post stronger-than-expected third-quarter results and provide a positive outlook for the fourth quarter, helped by growing penetration of dual-SIM phones and low-end refresh, Nomura said.
Solid results at the once mighty Nokia and the launch of its new Windows-based smartphones later in October could boost the stock in the near term, Nomura analysts said and upgraded Nokia shares to “neutral” from “reduce.”
“It increasingly seems that the depth of the Q2/Q3 margin squeeze was exaggerated by a greater-than-expected inventory correction,” the analysts wrote in a note to clients.
A Nokia Oyj store at the Afimall City shopping mall in central Moscow, Russia. Photo by Bloomberg.
“Our checks suggest that this adjustment process is now complete and thus may allow management to guide more positively for Q4,” said Nomura analysts, including Stuart Jeffrey -- who is a five-star rated analyst, according to StarMine data, for the accuracy of earnings estimates on firms under his coverage.
Nomura analysts now expect the company to break even in the third quarter, compared with their previous view of a loss of 2 cents per share.
According to StarMine’s SmartEstimate, which places more weight on recent forecasts by top-rated analysts, Nokia is expected to post a loss of 2 cents a share.
Separately, analysts at Credit Suisse, who forecast a third-quarter loss of 1 cent per share for Nokia, said they see some strength in near-term trends as volumes are driven by the impact of new dual-SIM phones in India and lean inventory levels in China.
Shares of Nokia were trading up more than 2% at €4.60 in morning trade on Wednesday. Nokia shares have slumped over 40% since the start of the year on worries that the company would lose so much market share before its new phones come out that it might never make up lost ground.
The launch of Nokia’s first Windows-based smartphone is expected to coincide with the annual Nokia World trade show in London in October-end and deliveries would need to start in early November to get the phones to consumers during the peak holiday-sales season.
However, Credit Suisse analysts expect Nokia will face long-term challenges in the smartphones and low-end segments.
A ramp up of Windows devices at lower price points is unlikely before the second half of 2012 as it depends on the next generation operating system from Microsoft Corp , Credit Suisse analysts wrote in a note to clients.
Nokia, the world’s largest phone maker by volume, left in the dust by Apple Inc and Google Inc , announced a new strategy at the start of the year to ditch its home-grown Symbian software for a deal with Microsoft.
Nomura analysts believe there is a high risk that declines in Symbian will not be offset by growth in Windows-based smartphones, which they expect could struggle to establish itself in the high-end segment due to a weak brand and the “entrenched” position of Apple and Google’s Android.
Within the lower-end segment, Nokia faces structural issues given the rise of Indian branded vendors and plans by Huawei Technologies Co Ltd and ZTE Corp to introduce lower-end smartphones in coming months, Credit Suisse analysts said.
Credit Suisse rates the Nokia stock “underperform” with a price target of €3.75 . Nomura analysts raised their price target on the stock to €4 from €3.60 .