Here is an article about Amazon's plans to release a smartphone. I have been saying that for months and am happy to have been lucky enough to post it a couple weeks ago on this blog. Some articles have surfaced suggesting AMZN buy NOK (trading at 1.86 now) for its patent portfolio of 30,000 patents, from which NOK gets $600MM in royalties per year.
I was worried about what the news of an Amazon smartphone would do to NOK--which may likely be the cause of NOK's 10% drop in price over the last couple of days. Fortunately, that random variable with unclear timing is now out of the way.
More on this later-- I believe NOK can trade much lower than it currently is. Based on 2011's numbers, the company's "free cash flow" was $700MM, compared with $5.5B in 2010. Free cash flow is one measure of the company's true earnings, which can be used here as an alternative to earnings, since theirs are negative. Let's say the company can surely be around for 4-5 more years, that values it approx at $2.8-4.5B. The current market value of the company is $7.13B, so it would not be unreasonable for the stock to drop to about $1 per share.
Nokia also pays a hefty dividend of about $2B per year, which it has not altered. A slash to this would be another news item that can bring the stock down to attractive levels.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment