Weekly Mobile Notes: Nokia and RIM

by Trefis Team
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The past week was an eventful one for the mobile sector, with two of the current smartphone underdogs seeing positive investor sentiment in a long time. Nokia’s (NYSE:NOK) stock is up 25% for the week on high demand being reported for its recently launched Windows Phone 8 flagship, the Lumia 920, at many retail partners in developed markets. At the same time, BlackBerry maker, Research in Motion (NASDAQ:RIMM), is seeing optimism return to the stock on increasing confidence that the management is finally getting its act straight with the recently announced launch of its new BlackBerry 10 devices in January.

Nokia

Nokia’s launch of Lumia Windows Phone 8 smartphones this holiday season seems to be off to a flying start. A number of reports have come out in the past few days detailing the high demand for the newly launched flagship, the Lumia 920, in the U.S. and Europe.TheNextWeb, for example, reported that the Lumia 920 was out of stock with two-week shipping times at Amazon and that only the white model was in stock at AT&T, Nokia’s exclusive partner for its flagship smartphone. ((Lumia 920 Sells out, TheNextWeb, November 21st, 2012)) Another report claimed that the Lumia 920 was selling very well in Europe as well. In Germany, particularly, many of Nokia’s retail partners have been experiencing Lumia sell-outs since the device became available earlier this month. [1]

As a result of the initial good news following the Lumia launch, Nokia’s stock has risen almost 25% in the past week. While the sell-outs are a good indicator of the pent-up demand that Nokia and Microsoft  have managed to create prior to the Lumia launch and is in line with our long-term view of the company, investors should be careful not to read too much into the news for we have no idea what the actual sales number are. Further, the coming months will be critical since Nokia will have to work hard to ensure that the demand doesn’t fizzle out post the initial euphoria in order to stage a turnaround in its smartphone business. However, we believe that even a small improvement in Nokia’s handset business, together with its ongoing turnaround in the wireless infrastructure joint venture with Siemens, could add much more value to the company. Our $4.50 price estimate for Nokia is about 35% ahead of the current market price.

RIM

RIM seems to be on a roll now that it has announced the launch date of its BlackBerry 10 platform on January 30. The carrier has seen its stock run up by more than 20% in the past week alone on the positive sentiment that has built up following the news. Confidence that the management will be able to deliver on its deadline this time after having missed it twice in the past year has also returned with the new BB10 devices now being lab-certified by more than 50 carriers worldwide.

However, the Q1 2013 launch implies that competitors such as Apple (NASDAQ:AAPL) and Samsung (PINK:SSNLF) will continue to munch on RIM’s market share until then and even beyond as RIM tries to generate positive market sentiment around the new devices. To add to RIM’s woes, competition in the smartphone market is only increasing with Microsoft (NASDAQ:MSFT) making a reinvigorated mobile play with its combined Windows 8/Windows Phone 8 push this holiday season. However, we still see more value in the stock coming from its huge subscriber base and the unique value propositions RIM can make in push email and security. Our price estimate of $12 for RIM’s stock is about 15% ahead of the current market price.

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Notes:
  1. Nokia’s New Lumia 920 Selling Well; Germans Especially Gung Ho, AllThingsD, 20th November 2012 []
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