Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high

Nokia. (NOK) Nokia’s stock price has been fairly flat over the last year, thanks, in part, to Motorola. Nokia took a big hit when Motorola warned its margins were poor in the fourth quarter.

Nokia does have some important things going for it. How about being No.1 in global market share for handsets. The company has just introduced a slim phone to compete with the Motorola RAZR and cut a deal with Skype to offer VoIP on some of its cell phones. The knock against Nokia is that its sales are growing in China and India where phones are cheap and have lower margins. Growth in the US and Europe is poor.

Handsets are not the only business line at Nokia. It makes network equipment and recently announced it would  help build out the huge WiMax network for Sprint. And, Nokia and Siemens are combining their network equipment units in a joint venture that should be much more profitable just on cost eliminations.

Ratings on Nokia’s shares are being cut left and right. That is often a good time to look at the shares in a company that is a clear market leader.

If any company has the ability to squeeze cost-per-handset, it is Nokia. It controls 33% of the global handset market. As handset prices drop no other company has a better chance of holding margins at a reasonable level. The company also has huge cash reserves that work out to about $3 per share, according to Morningstar. With shares at just above $19 very few companies can boast that kind of ratio. The cash also helps the company drive a 2% yield and could allow the company to shrink its shares outstanding through buy-backs.

Factors that could drive the stock above forecast: Even a small improvement in margins on handsets above Wall St. expectation could move the shares up. So could early success in the equipment joint venture with Siemens.

Factors that could move the shares below forecast: any drop in global market share or below expectation figures on handset market could pound the stock.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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