Nokia Oyj (ADR) (NOK) Stock Is Nothing but a Coin Toss

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NOK stock - Nokia Oyj (ADR) (NOK) Stock Is Nothing but a Coin Toss

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Every year, an organization that’s left for dead revives, surprising all but the contrarians. Nokia Oyj (ADR) (NYSE:NOK) certainly qualifies as one of 2017’s top contenders. Year-to-date, NOK stock is up 29%, mocking those like me who interpreted its 30% loss in 2016 as a harbinger. But now, Nokia has a decidedly unenviable task: prove that its recovery is more than just a dead-cat bounce.

Given the length of its rally, most contrarians feel justified in their ongoing bullishness. However, some technical signs have appeared that might cast a cloud of doubt. Since the first of June, Nokia stock slipped more than 4% in the markets. When I last wrote about NOK on July 6, claiming that it needed a new story to drive momentum, shares have only moved up 1%.

NOK stock is the very definition of what InvestorPlace contributor Will Ashworth called a “mediocre” investment. Regardless of all the news that’s circulating, at the end of the day, it has to positively impact shares. We’re investors, not librarians.

Still, Nokia stock has proven detractors wrong in the recent past. The company also benefits from exciting developments. In his most recent write-up, Ashworth considered the bullish argument for Nokia. Should investors now jump on the opportunity?

Nokia Fighting In an Overcrowded Space

As Ashworth points out, NOK’s recent patent dispute settlement with Apple Inc. (NASDAQ:AAPL) is a big step forward. He writes, “That NOK and AAPL buried the hatchet so quickly — the dispute began in December — is a sign that management in Finland just wants to keep rebuilding its business.”

Under the terms of the licensing agreement, Apple will provide an upfront payment, as well as quarterly payments, to Nokia. Additionally, the Finnish telecom has the right to sell its digital health products in Apple’s brick-and-mortar and online stores.

On surface level, it sounds like a win-win for NOK stock, particularly if, as Ashworth states, the extra revenues can go towards dividend yields. Another big boost is the Nokia 8, the company’s premium-brand smartphone. According to industry experts, the “8” has all the bells and whistles that a tech geek could want.

Due to favorable cost structures, if Nokia hits sales out of the park, they can expect a significant boost. But the problem, like most things associated with NOK stock, is the word “if.”

When it comes to the smart device market, “ifs” are major-league risks. For instance, every analysts loves to talk about smartphones’ nominal sales figures. What they don’t prefer to discuss is sales growth. Whether you love Apple or Android, the market has matured. To win in smart devices, you have to steal market share. I’m not sure if selling a premium phone with a premium price tag is going to do the trick.

Oh, and don’t assume China is a smartphone panacea. Even their extraordinarily massive consumer base is growing tired of the same-old, same-old. If I wanted to buy NOK stock, I need bigger solutions than the ones management is proposing.

NOK Stock Lacks Spark

NOK stock, Nokia
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Source: Source: JYE Financial, unless otherwise indicated

Interestingly, throughout this month, Nokia stock has mostly traded above its 50 day moving average. But in the last four sessions, NOK shares have slipped slightly below this indicator commonly used to gauge market sentiment.

Furthermore, I’m not digging the fact that since the end of April of this year, volume has trended downward. At the same time, NOK stock is up nearly 18% between April 26 and July 21.

If you’re a technical trader, you want to see volume confirm the price action. In this case, Nokia volume is contradicting its shares’ optimism.

My assessment at this point is that Nokia stock is a 50/50 bet at best. Whether it continues on its bullish trajectory or hits a corrective cycle depends on its upcoming earnings report.

I’m not a fan of such gambles because it’s a literal crapshoot. If management talks the good talk, and the Street buys it, then NOK is off to the races. If they strike a cautious tone, we could see the opposite situation, irrespective of the numbers they pull.

Ultimately, if you prefer to take a walk on the wild side, then NOK stock could be for you. With a major fundamental event in the form of an earnings report looming, you could collect a sweet profit. On the flipside, you could collect a not-so-sweet loss. For me, Nokia has done some interesting things, but not enough to get me excited for the long haul.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/nokia-oyj-adr-nok-stock-is-nothing-but-a-coin-toss/.

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