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Nokia Stock: Tailwind from Intensified 5G Deployments

Stock MarketsSep 27, 2021 07:00PM ET
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© Reuters. Nokia Stock: Tailwind from Intensified 5G Deployments

Nokia (NYSE:NOK) touts a year-to-date price increase of 45%, but I remain bullish on the stock. Its forward P/E is still only 18.3x.  

Nokia is a Finnish company engaged in the $114-billion wireless network industry. It currently has over 100 5G deals, and 160 5G engagement contracts.

Its 5G wireless network solutions, and fiber-to-the-home fixed broadband services could boost NOK’s YTD gain to over 50%. (See Nokia stock charts on TipRanks)

Surge in 5G Infrastructure

Government mandates are compelling telecom companies to upgrade their 4G cell sites to 5G. Wireless and fixed broadband companies cannot operate without government licenses.

Politicians in the Philippines can force companies like PLDT Inc. (NYSE:PHI) and Globe Telecom (OTC:GTMEY) to upgrade their network infrastructure to 5G. Other countries’ politicians can do the same.

The rising deployment of 5G networks could improve Nokia’s TTM revenue of $26.4 billion. More 5G-related contracts could help Nokia improve its quarterly net income to above $500 million.

The FTTH business of Nokia also gives it a tailwind from the $15.3-billion fiber-to-the-home Internet market.

Huawei Still on U.S. Blacklist

Nokia’s estimated forward revenue CAGR is only 0.8%. This could significantly improve if Huawei remains forever in President Joe Biden’s list of blacklisted companies. North American and European countries are banning and replacing their Huawei network hardware.

Nokia will only have to compete against Juniper Networks (NYSE:JNPR), Ericsson (BS:ERICAs) (ERIC), and Arista (ANET) on 5G contracts in North America, Europe, and other U.S.-allied countries.

Less competition will allow Nokia to get a greater share of the $80.5-billion 5G infrastructure business.

Wall Street’s Take

The consensus among Wall Street analysts is that Nokia is a Moderate Buy, based on seven Buys and three Holds. The average NOK price target is $7.33, implying 29.7% upside potential.

Conclusion

The relative undervaluation of Nokia makes it an intriguing investment. Its leadership in 5G wireless infrastructure and fiber-to-the-home optical broadband is propelling it back to profitability.

The extensive number of patents owned by Nokia gives it an edge against its rivals Ericsson, Arista, and Juniper Networks.

Disclosure: At the time of publication, Motek Moyen did not have a position in any of the securities mentioned in this article.

​Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

Nokia Stock: Tailwind from Intensified 5G Deployments
 

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