Speculation that the troubled Nokia has turned the corner is being pumped up by option traders betting that the company will quickly return to profit. These stock market moves have pushed options on Nokia shares to almost double the level of bearish ones, the highest ratio in about a year, according to data compiled by Bloomberg.
The traders are banking that Nokia's earning will surprise the financial markets this month after the company reported its first quarterly loss in October. "Investors are betting that Nokia can't continue to get things wrong," said Michael Yoshikami, chief investment strategist at YCMNet Advisors in the US. "The iPhone has been a wake-up call for them and they are starting to show that they understand the market has changed."
Some of this guesswork is in anticipation that Nokia will unveil new touch-screen phones and improved applications to win back customers, boosted by analysts expecting the company to earn €0.16 a share in the period ended last month, reversing a loss of €0.15 the previous quarter. "The fourth quarter is shaping up to be a little bit healthier than they thought," said Jeff Kvaal, a New York-based analyst at Barclays.
Common among the analyst community is the belief that Nokia's Q4 shipment will be better than expected. One firm is raising its estimate for last quarter's device volume to 121 million, up from 118 million.
The likelihood that Nokia's share price will undergo a recovery is seen as strong, given that the company had suffered a price fall of nearly 70 per cent from a six-year high of €28.60 in November 2007 after reporting it had lost market share to Apple and RIM.
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Bloomberg
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