Apple (AAPL), Nokia (NOK) and Research In Motion (RIMM) are among the largest technology and telecommunication companies in the world. Their business areas are well-diversified and segmented into different sectors. However, they are best-known for their primary focus: Manufacturing mobile communication and media devices. These mobile device producers are among the biggest rivals in the smart phone market. Apple’s flagship iPhone, Nokia’s smart phones, and Research in Motion’s BlackBerry dominate 56.9% of the Western smart phone market as of first quarter 2011. From an investment perspective, it is essential to look at the key ratios and fundamentals of the big three. Here is a brief analysis of three mobile communication giants: (Data from finviz.com)
Apple is the largest high tech company in earth, manufacturing and selling computer software, personal computers and computer electronics. Apple’s best known hardware products can be listed as Mac Book, iPod, iPhone and iPad. In addition to the hardware business, Apple is the developer of the Mac OS operating system. Apple is famous with products having aesthetic design and distinctive advertising campaigns led by CEO Steve Jobs. In the smart phone market, Apple replaced Nokia as the worldwide market leader by the first quarter of 2011. iPhone has a market share above 20% worldwide. However, until 2011, the iPhone was second to RIM’s BlackBerry. Looking at the key ratios of Apple, the first notable thing is the outstanding market cap. Apple has a market cap of $307.19 billion. This market cap makes Apple the biggest technology company in the world. In the last five years, EPS growth was 57.78%, and for the following five years, analysts estimate an EPS growth of 20.50%. The trailing P/E ratio is 15.83, while forward P/E ratio decreases to 11.67. Apple has a beta value of 1.34. Insiders own 0.04% of the company. On May 25, 2011 Wedbush upgraded Apple with a target price of $450. Apple does not pay dividends, yet. Current price of $336 is way below the analyst average target price of $448.78.
Nokia is a Finnish multinational telecommunications company established in Espoo, Finland. Nokia is the world's largest manufacturer of mobile phones: its global device market share was 31% in the fourth quarter 2010. Nokia has the second place position in the smart phone market share with 19.8%, recently topped by Apple’s iPhone. However, in the U.S. market, Nokia has a relatively low market share of 8% in smart phones. This makes Nokia the fifth biggest smart phone producer in the U.S. market. On 11 February 2011, Nokia announced a new alliance with Microsoft (MSFT). The company will replace Symbian with Windows Mobile Phone 7. Soon after this announcement, Nokia's share price decreased by 14%; its biggest drop since July 2009. Nokia has a market cap of $30.89 billion. It's trading with a low P/E ratio of 11.61, and forward P/E ratio is 10.84. Nokia also has a high beta value of 1.58. EPS decreased by 9.64% annually, in the previous five years. However, in the next five years, Nokia is estimated to have an EPS growth of 5.63%. Nokia is an outstanding dividend payer in the market. Current dividend yield is 6.71%. On April 1, 2011, RBC Capital Mkts downgraded Nokia shares to $12, still keeping the outperform status. However, the stock is a screaming buy with an average target price of $9.86. Current price level of $8.14 is 26% below the 52-week high.
Research in Motion is an Ontario, Canada, based telecommunications and wireless device company. RIMM’s best known product is the BlackBerry smart phone. BlackBerry has a market share of 16.5% in the worldwide smart phone sector. That makes RIMM the third biggest smart phone producer worldwide. However, in the U.S. market, RIMM is the leading smart phone supplier with a market share of more than 30%. In 2009, soon after the financial crisis, Fortune named RIM fastest growing company in the world, with an EPS growth of 84%. Research in Motion has the smallest market cap among these three companies with a market cap of $22.5 billion. However, its P/E ratio is the lowest of all. Its trailing P/E ratio is 6.79, and forward P/E ratio is estimated to be 6.25. RIM experienced an EPS growth of 58.34% in the past five years. Furthermore, in the next five years, EPS growth is expected to be 10.25%. RIMM’s beta of 1.88 is the highest among others. Insiders own 10.62% of shares, which is incredibly high compared to Apple. On May 24, Wunderlich downgraded RIM shares dramatically, from $76 to $46. According to Wunderlich, RIMM will not be able to recover and participate in mainstream smart phone industry growth. When looking at the chart from a technical perspective, I observe significant downward gaps, which is expected to be filled sooner or later in the first upward movement.
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