Goldman Sachs this Nokia (NOK) has been bombarded by too much bad news. When Motorola guided downward for the last quarter and said that margins were under pressure from lower cost handset, Nokia’s shares dropped as well . Goldman think the worst is behind the world’s largest cellphone maker. The bank sees Nokia’s earnings bottoming. Handset prices and margins should recover.
It’s a nice theory. But Nokia’s stock may still be expensive.
Over the last two year’s Nokia’s shares are up 30%. Mototola’s (MOT) are up about 3%.
During Nokia’s last quarter earnings announcement, it blamed poor earnings performance on cheap, low-profit phones it sold in India and China. Since those markets continue to be the growth geographies for Nokia and its rivals, and sales in the US and Europe are slowing, it is very hard to see how that trend will change.
Of course, Motorola, Samsung, and Sony-Ericsson still want their market shares to grow. That places a second vector of pressures on handset prices.
No, Nokia is not out of the woods. It is not even close.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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