Remember Nokia Corp (ADR) (NYSE:NOK) — the company that used to make popular mobile phones before smartphones came along and left them in the dust? Investors have largely forgotten them. Just look at what’s happened to NOK stock the last two years.
Yikes.
But look closely at the move Nokia stock has made in the last month — up more than 13%. That’s a sign of Wall Street taking notice of NOK again. What are they noticing?
Nokia’s rumored unveiling of its own smartphone, the Nokia P.
NOK Stock Under New Management
The Nokia P is a window into Finnish startup HMD Global’s plan to revive the moribund Nokia brand. Comprised of former Nokia executives, HMD Global bought the license to make Nokia phones earlier this year from Microsoft Corporation (NASDAQ:MSFT) (which bought Nokia’s failing phone business in 2014), finding the appeal in a once-prominent name at a bargain price.
Speaking of cheap, that’s exactly what the Nokia P phones will apparently be at just $150 a pop — less than a quarter of the price of an iPhone 7. They’ll feature a 5-inch screen, high-end camera and super-fast chips courtesy of Qualcomm, Inc. (NASDAQ:QCOM). The new smartphone (which will reportedly come in two slightly different models) is set to debut sometime in 2017.
The Nokia P is the first buzzworthy product Nokia has come out with in years. For more than a decade starting in the late ‘90s, Nokia was the biggest seller of mobile phones in the world. But once Apple Inc. (NASDAQ:AAPL), Samsung (OTCMKTS:SSNLF) and others came out with smartphones, Nokia’s phones became obsolete — the equivalent of Zach Morris’ walkie-talkie-sized cell phone in “Saved By the Bell.” Nokia essentially admitted defeat and focused mostly on selling telecom-network equipment.
Not surprisingly, network equipment sales haven’t come close to replacing the lost revenue from Nokia’s once-booming cell phone business. In 2008, Nokia did $74 billion in sales, with a per-share profit of $1.57.
The company’s sales have declined every year since, falling to a measly $13.6 billion in 2015; and earnings are just a fraction of what they were a decade ago.
Perhaps the Nokia P will change that. Even before its new smartphone hits the market, Nokia’s sales have already bounced back this year, and are on track for a 72% increase. Who knows how the Nokia P will fare in an extremely crowded smartphone market, though the low price could sway some consumers. At the very least, it puts Nokia back on the map after years in the wilderness.
And that’s why investors are suddenly snatching up NOK stock. The run-up in the stock in the past month-plus has mostly coincided with details of the Nokia P trickling out.
Bigger picture, it will be interesting to see what other plans HMD Global has for Nokia. Tablets are the next logical choice, especially after HMD paid $350 million in licensing fees to Microsoft for both mobile phone and tablet usage over the next 10 years as part of their deal with Nokia.
It could very well fail to reinvigorate the Nokia brand the same way Microsoft did. For the moment, however, Nokia suddenly seems full of possibility — something we haven’t been able to say about the once-proud company for a long time.
Buy NOK Stock on Nokia P Hype
Possibility is an alluring quality to investors, and it should continue to drive NOK stock in advance of the Nokia P launch. Based on that possibility, it’s worth taking out at least a small position right now.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
