NOK Stock: Nokia May Rise Sooner Than You Think
Once the king of cell phones, Nokia (NYSE:NOK) has turned into a different kind of business. The company is a leading provider of network infrastructure and other network solutions. This makes NOK stock a crucial player in the next 5G revolution.
Many investors have been sleeping on this title for years as it continues to win major contracts. However, last year the enterprising people of the Reddit r / WallStreetBets forum paid attention to the stock. This fueled a massive short-term rally in NOK stocks which has since calmed down.
I believe, however, that other investors are starting to realize the value of NOK shares. Since hitting a low of around $ 3.80, NOK stock has followed a steady uptrend and is now trading near $ 6.
Here’s why NOK stocks would be a great addition to an investment portfolio.
Nokia’s 5G activity in China is full of promise
Nokia continues to make progress in its 5G business. The company has contracts with a wide range of telecommunications providers around the world. Its most notable recent victory, however, is the company’s first 5G radio contract in China. This is an important victory for the Finnish company, as China is a huge market for 5G. Currently, half of the world’s 4G base stations are in China. Extrapolate that number to the 5G rollout and you can see what a huge opportunity this is for the business.
China is aggressively deploying its 5G infrastructure network. Currently, the country has the largest 5G network in the world with 260 million mobile connections and around 916,000 5G base stations. The country is targeting a 40% penetration rate by 2023, which translates to 560 million 5G users.
While Chinese suppliers tend to win the vast majority of government contracts, Nokia can position itself as the Western supplier of choice. This is due to the current geopolitical tensions between China and Sweden, which makes it difficult for competitors Ericsson (NASDAQ:ERIC) to enter into agreements.
NOK Stock is cheap at these prices
Although the stock price is below $ 6 and is a favorite with the r / WallStreetBets crowd, Nokia is a mature and stable company. NOK stock trades at a market cap of $ 33 billion. This makes NOK stocks a suitable investment for medium risk portfolios. The good news is that this stock is actually trading at relatively cheap valuations.
Wall Street analysts have NOK stocks at a âmoderate buyâ rating as compiled by Tipranks. The stock has an average price target of $ 7.23, which is 24.6% above current prices. Analysts’ price targets range from a low of $ 5.79 to a high of $ 8.
Looking at the financial indicators of the company, one can see that the NOK stock is trading at a reasonable valuation. Currently, NOK stock is trading at a forward price / earnings ratio of 14.9x. It is well below the S&P 500 current P / E ratio of about 30x. The P / E ratio of the NOK share is also lower than the Dow Jones Industrial Average P / E ratio of 23.6x. Being cautious and assuming that NOK stock would then trade at the multiple of the Dow Jones would imply a rise of around 57%.
Nokia is a solid business and something that investors can buy and hold for a very long time. In the second quarter of 2021, the company had abundant liquidity with 3.7 billion euros in net cash. The second quarter of 2021 is the fifth consecutive quarter since the pandemic that the company has had positive net cash flow. The company clearly generates value for its shareholders as its return on invested capital for the quarter was 18.4%.
Takeaway for investors
It’s rare to see a stock that exhibits both growth and value characteristics. I believe NOK stock is sleeping by a lot of investors. The company is a key driver of the 5G revolution and is trading for a relatively cheap price.
Investors should consider incorporating Nokia into their portfolio.
At the date of publication, Joseph nograles did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.