Nokia’s Dual SIM Phones Could Help Add Some Life to Shares
The uptake for Nokia’s (NYSE:NOK) dual SIM phones have led a handful of brokers like RBC to raise their unit forecasts. [1] Based on the popularity of dual SIM phones in markets like China and India, RBC raised its estimate for Nokia mobile phone shipments for this quarter from 89 million to 100 million. We expect Nokia to sell around 90 million phones in the quarter and 115 million in Q4 this year as indicated in the included chart. We believe that the main upside to Nokia’s mobile phone sales could come in Q4 as Nokia will release its first set of phones on Microsoft’s (NASDAQ:MSFT) Windows Phone 7 operating system and will also benefit from the holiday season during which the consumer spending is at the maximum.
We maintain $6.65 price estimate for Nokia stock, which is about 5% above market price.
Nokia has been late in introducing dual SIM phones..
Dual SIM devices are popular in emerging markets like China and India as many users have multiple mobile accounts. The reasons include varying plan costs and the need to have different phone numbers for official and personal use.
Emerging markets account for around 37% of our price estimate for Nokia stock, which indicates the importance of these markets to Nokia.
In the past, Nokia has failed to tap the growing market for dual SIM phones in China and India. Around a year back, we discussed this aspect in detail in which we discussed how Nokia started losing share to rivals Samsung, LG and local players in these markets as it ignored some of these popular trends (see Indian Market Losses Could Hurt Nokia’s Stock).
..Though it has started to be more aggressive now
During the last quarter’s earnings conference call, Nokia acknowledged that the lack of dual SIM offerings was a headwind to its performance, but the company was upbeat about its prospects in the future. The management mentioned that Q2 marked the beginning of a significant transition in its product line with the introduction of first dual SIM devices in a number of emerging markets. [2] However, it remains be seen if these efforts result in the actual upside to Nokia sales.
Can dual SIM phones help Nokia stock?
As predicted by RBC, if dual SIM phones indeed help Nokia in increasing its sales to 100 million this quarter, the upside to our $6.65 price estimate for Nokia stock will be minimal.
However, looking at the medium to long-term perspective, if Nokia does manage to stop its declines by maintaining share in emerging markets, there could be an upside of 10% to our price estimate for Nokia stock.
You can tweak the above chart yourself to see the impact of the change in Nokia’s market share on its stock value.
See our complete analysis for Nokia stock here
Notes:- Nokia: RBC Says Buy; Units Boosted By Dual-SIM Model, Barron’s, August 26th, 2011 [↩]
- Nokia Q2 2011 earnings conference call transcript, SeekingAlpha, July 21st, 2011 [↩]