Nokia Corporation (NYSE:NOK)’s Earnings Will Decide The Stock's Next Move

Analyst at MKM Partners retains its “Sell” rating on Nokia Corporation (ADR) (NYSE:NOK) with a price target of $1.50. They made the computations before the 3^rd quarter results were revealed on October 18, emphasizing that due to the absence of Windows Phone 8 (WP8), cash burn and feature phones will grab all the attention. Nokia shares closed at $2.56 yesterday and a projected 52-week calculations state that the range is from $1.63-$7.38.

Chances of Nokia’s disappointment in the quarter are less, other than high cash burn. The bitter news is after the unveiling of the WP8 Lumia phones and the inability to connect with the audience. In-line revenues will be around €7.00 billion, slightly more than consensus EBIT loss of €304 million.

MKM states that smartphones powered by WP7.5 and Symbian were bound to generate weak sales figures in the 3^rd quarter. The new Asha models from Nokia improved the company’s position slightly in feature phone units and there was a sizeable amount of cash burn in the quarter. Nokia went up by 39% in the last few months as opposed to up 5% for the S&P500 due to the hype surrounding the Lumia launch (WP8 -powered). But the future of the Nokia’s WP8 phones does not seem to be too different from its WP7.5 line of phones.

The Devices and Services unit will face a cash burn of around €400 million with the overall burn amounting to €500 million in the 3^rd quarter, according to the timing of restructuring payments. Even so, revenue is still flowing in from working capital, even if NSN revenues are low. MKM is not too optimistic about the increase in demand for Windows Phone operating system or Nokia hardware as the former will face immense difficulties in grabbing smartphone shares while the latter is already losing share within the Windows network.

Shares of NOK were up 4.69% to $2.68.

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