The Zacks Analyst Blog Highlights: America Movil, Nokia, Apple, Google and Microsoft

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Apr 12, 2013, 09:30 ET

CHICAGO, April 12, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include America Movil (NYSE:AMX), Nokia Corp. (NYSE:NOK), Apple Inc. (Nasdaq:AAPL), Google Inc. (Nasdaq:GOOG) and Microsoft Corp. (Nasdaq:MSFT).

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Here are highlights from Thursday's Analyst Blog:

Carlos Slim Beefs Up AMX Stake

Carlos Slim, chairman of the Mexican telecom giant America Movil (NYSE:AMX) and the world's richest person, has raised his stakes in America Movil. Slim has increased his class L shares holding in the company to 14.4% from 13.7% owned previously. Given a significant drop in the company's market value due to regulatory changes, increasing the stakes in the company at this point remains a strategic move by Slim as it strengthens his ownership.

In addition, Slim's move is also suggestive of the significant growth prospects within America Movil. The market may react positively to this news and even help the company to bounce back after a deep plunge in share value.

In an effort to stall share price decline, America Movil increased its share repurchase fund by 40 billion pesos ($3.2 billion). The increase in share repurchase also helped the company to safeguard its market value, which was affected by the proposed regulatory bill in Mexico. In Mar 2013, Mexican President Enrique Pena Nieto proposed a new bill highlighting several measures to reform its telecom and television industry. The main objective of this bill is to bring more uniformity and transparency into the sector and curb concentration of power that lies with predominant players, which dictate market behavior.

However, the proposal has struck the Mexican telecom and television industry on a discordant note as it unfavorably targets giant corporations such as America Movil. The proposal stresses on the implementation of the asymmetric regulations that faced severe condemnation by the company.

Following this ruling, America Movil experienced a significant decline in its share price that swept away billions of dollars in its market valuation. Since then, the company has aggressively followed a share repurchase policy to mend the loss.

However, we believe share buyback and stake increases by management and shareholders can be a short-term remedy to improve market position. But America Movil still has to pass through the litmus test when the new telecom bill comes into action. How the company survives in the new regulatory environment of Mexico amid cut-throat competition is something to watch out for.

America Movil has a Zacks Rank #3, implying a Hold rating.

Nokia Downgraded to Neutral

We downgrade our recommendation on Nokia Corp. (NYSE:NOK) to Neutral ahead of its first quarter of 2013 financial results. The stock price has nearly doubled in the last year. In our view, Nokia is currently fairly valued.

Why the Downgrade?

Ever since Apple Inc.'s (Nasdaq:AAPL) iPhone hit the market, Nokia has been facing distressing times. The situation further aggravated once Google Inc. (Nasdaq:GOOG) launched its Android software and several handset manufacturers adopted that operating system.

Furthermore, Android-based smartphones are flourishing in the emerging markets of China and India. Price elasticity of demand is very high in these markets due to low per capita income and the existence of several low-cost Asian phone manufacturers like Samsung, LG Electronics, HTC and ZTE. Together, these may result in lower average selling price (ASP) and less-than-expected handset sale.

Meanwhile, the stock price of Nokia has soared 116% in the last year, which may restrict above market gain anytime soon.

Risk/Reward Almost Balanced

Nevertheless, the flagship Lumia smartphone series of Nokia has received reasonable market traction in the lucrative North American region. Lumia runs on Microsoft Corp.'s (Nasdaq:MSFT) Windows Phone operating system. Further, its mid-ranged Asha series of full-touch phones also performed well in the emerging Asia-Pacific region.

We believe that "NOKIA" is still a strong brand name that can perform well if management introduces appropriate products suitable for the next generation. The company has effectively streamlined its cost structure, and consequently Nokia's margins and cash position improved in the last reported quarter.

In the meantime, Nokia suffered severe blows from several major credit rating agencies. Standard & Poor's Rating Services (S&P), Moody's Investor's Services and Fitch Ratings, all have downgraded the company's credit ratings and have currently assigned junk category to Nokia.

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