Make it seven straight. Nokia (NYSE: NOK) has reeled off a winning streak that has seen its shares rise every day thus far in September.

The surge comes amid a pair of analyst upgrades and a change in the corner office. The rebound is also due to the fact that this unloved stock had become so cheap that it had nowhere to go but up. As I wrote last month: “shares have fallen so far, and the company’s balance sheet is so strong, that any further share price weakness looks unlikely.”
[Read: 3 Stocks That Can Survive a Bear Market ]
 
But is this just a head fake, or are shares really on the road to recovery? Let’s take a look.

It can’t get worse
Both Morgan Stanley (U.K.) and Merrill Lynch boosted their rating on Nokia this week with a fairly unusual investment thesis: business is so lousy and expectations for a rebound are so low that any positive news would be a real surprise. Morgan Stanley notes that Nokia’s latest line of smart phones, known as N8, are off to a good start in Europe. And Merrill Lynch predicts that Nokia will unveil a splashy new product at an annual user conference to be held in Europe next week.

But most analysts continue to take a dim view of any rebound. Many believe that Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) simply have too much momentum to be stopped and that Nokia has made a string of bad moves that will be hard to undo. For example, while Apple, Google and Research in Motion (Nasdaq: RIMM) have carefully courted the wireless service providers like AT&T (NYSE: T) and Verizon (NYSE: VZ), Nokia has been virtually absent in these company’s stores.

Nokia instead staked a claim to emerging markets, where these carrier relationships are not nearly as important. Trouble is, those markets are very price-sensitive and Nokia has only made traction with the cheapest lines of phones. That explains why Nokia’s operating profit margins have fallen from 16% in 2008 to 3% in 2009.

Corner office shake-up
Part of this week’s upward move is due to a new executive in the driver’s seat. Beleaguered Chief Executive Officer (CEO) Olli-Pekka Kallasvuo was finally relieved of his command, and the Board brought in Stephen Elop. To his credit, Mr. Elop has overseen successful divisions at Microsoft (Nasdaq: MSFT) and Cisco Systems (Nasdaq: CSCO). On the debit side, he appears to have zero experience in the mobile phone business. Nokia is hoping that he brings a general set of strong leadership skills and that his lieutenants can help steer the development plans back on track.

Market by market
As a recap, Nokia is very strong in emerging markets, strong-but-slipping in Europe and almost non-existent in North America. That’s fine. The company can thrive outside the United States and generate high levels of profits. But North American-based firms such as Apple, Google and RIM are gearing up for a deeper push into Nokia’s home turf. So it’s really not a matter of focusing on specific markets. Instead this is a truly global business where regional distinctions are diminishing.
 
Lows costs, deep pockets, extensive channels
But Nokia certainly still has considerable assets. Thanks to the sheer size of its emerging markets business, it has achieved such scale economies that it will remain the lowest cost manufacturer. And the company’s $10 billion in cash and investments means it has the resources to aggressively push the needle in terms of R&D. Lastly, the company’s 15 years of sales channel building can’t easily be replicated, so Google, Apple and others will have to work to make inroads. And it’s those factors right there that investors should focus on.

Instead, investors are focusing on new bullishness from some analysts and a new CEO. More than likely, those catalysts will recede in importance and the recent rally may well fade out. Indeed some of the rally may have been due to short covering. As of mid-August, 57 million shares were held short, and shorts tend to avoid dust-ups with sell-side analysts that have just made a fresh upgrade. Once those upgrades have been out there for a few weeks, short investors tend to climb back on with their negative bets.

Action to Take –> Investors wanting to bet on a rebound at Nokia might be wise to wait for a pullback in the shares. As I wrote earlier this summer, Nokia still has considerable resources and can’t be counted out. But this week’s rally looks to be taking place for the wrong reasons. Those bullish analysts at Morgan Stanley and Merrill Lynch might eventually be correct that Nokia is getting back in the game. But their call seems to be awfully early. Nokia has made for a nice trade this week. But it could be several quarters — at least — before most investors think this makes for a good long-term investment.