Nokia (NYSE: NOK) is frequently belittled for being slow to develop the latest smartphones and touchscreen devices, and its market share in the U.S. stinks, too.
But this morning, UBS analyst Gareth Jenkins saw something the rest of us may be missing, and raised his rating on the stock to ‘buy’ from ‘neutral’ and increased his price target to $19.55 from $14.16 a share, reports Barron’s. The stock is currently trading down 7 cents at $15.50 a share.
He said there’s two primary reasons why Nokia’s underrated. First, he said Nokia will be able to leverage its global market share as more people adopt smartphones. Second, he said they should be able to leverage their market share to sell services in addition to devices. “Nokia is one of few vendors who can profitably offer lower priced smartphones for the emerging markets,” he wrote, adding that “we believe Nokia’s current valuation implies no value to its ability to transition consumers into Nokia service subscribers.”
Both points are valid, however, the company faces a number of challenges. It is still waiting for their Symbian and MeeGo operating systems to be significantly updated in order for the phones to have a competitive look and feel. Those are coming this year, and will be updated again next year. On the services front, Nokia has been trying for some time to offer things, like email and mapping and navigation. But it faces steep competition from Google (NSDQ: GOOG), Microsoft (NSDQ: MSFT), Yahoo (NSDQ: YHOO) and others. It may have a better chance to win consumers over in countries where online habits are not yet formed. Still, Nokia had to stop charging for its mapping services after Google started offering theirs for free. Since then, it successfully recorded millions of downloads, which they hope will translate to paid downloads as people become aware of other services.
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