Nokia (NOK) Outperformed Apple (AAPL) Since Sept.; Can the Momentum Last?

December 17, 2012 2:30 PM EST
Nokia Oyj (NYSE: NOK) isn't the world's most popular stock, given that it struggles to stay relevant in the world's most popular tech segment. But, sometimes a little goes a long way.

If you went back to the start of September, just when Apple (Nasdaq: AAPL) was slated to release its next-generation iPhone and said short Apple and buy Nokia, you might just end up with miscellaneous garbage flying your way (depending on the company you keep, of course). Most analyst expected nothing but upside for Apple: it's got a robust ecosystem, there's the new iPhone 5, logistics are improving, and Foxconn was even stepping its game up to accommodate massive volume.

Except, that's not how things really panned out. Instead, Apple fumbled through the launch with production issues and application errors (read: Apple's map app) that caused investors to feel a little funny...and not the good kind of funny. The "uh oh, it really is a long way down from the top." Apple is down over 22 percent since then and 27.4 percent since hitting an all-time high above $700.

In Nokia's case, expectations have never been lower. The Finnish mobile giant is banking on a largely ignored operating system to gain smartphone share and is seeing a tough market for feature phones, which have now become Nokia's bread-and-butter product line. Shares, however, are up 42 percent since the start of September.

Why? Nokia is set to report fourth-quarter results on January 24th. Given that Nokia is expected to sell about 3 million Lumia-series smartphones in the quarter and Nokia just debuted its new low-cost Asha line, expectations have never been more favorable now, or even into 2013.

The biggest bit of news going in Nokia's favor was landing a smartphone deal with China Mobile (NYSE: CHL). The carrier is the world's largest at 700 million subs with 76 million of those 3G subscribers. The best part of the deal is that Apple hasn't been able to reach an agreement with China Mobile and may not strike one at least before its next quarterly report.

So, those willing to take a risk have been rewarded so far. But, at $4 per share, Nokia is well off off highs above $30 where it traded during its peak (and before the iPhone really took hold).

We also believe that Apple will have upside potential. Two million smartphone units being sold over a weekend is nothing to sneeze at and Apple will have improved manufacturing capability from suppliers moving forward. Should the company start producing its own chips and debut a TV in 2013, those are some serious catalysts for the stock getting back up to at least $600 per share.

Apple and Nokia are both higher on the session Monday.

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AppleĀ“s two million units?
AndyB on 2012-12-18 03:01:50
Mark as Spam | Reply to this comment

Did Apple really announce, that they SOLD two million smartphone units during weekend? Read the announcement again and carefully, please. How do they get real time data from resellers?

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