Nokia Oyj (ADR) (NYSE:NOK) stock is poised for a comeback. Nokia retreated from the scene after smartphones made their popular cell phones obsolete. But it might be time to look at Nokia stock again.
Now the owner of what was formerly Alcatel-Lucent, Nokia is currently working to bring new 5G technologies to the market. This is just one example of why when the company reports earnings on February 1, investors should look more at future plans than current earnings.
Look For Deals, Not Numbers
Earnings per share (EPS) estimates for Nokia stand at 11 cents per share. Analysts expect revenues of about $7.52 billion. Investors should not be focused here, however.
Instead, you should pay attention to Nokia’s agreements with other telecom companies.
The one-time dominant player in the cellular phone market saw nearly all of its market share wiped out by Apple Inc. (NASDAQ:AAPL) and the advent of its iPhone.
Since Nokia’s phones lost out to the smartphone, the company has been working to find another growth market. They appear to have finally found it with their purchase of Alcatel-Lucent and a focus on telecom equipment. This move gives Nokia a stake in the upgrade to 5G technology as well as the Internet of Things (IoT).
Telecom service providers have taken an interest. Nokia recently teamed up with T-Mobile US Inc (NASDAQ:TMUS) and Intel Corporation (NASDAQ:INTC) on a test in the Seattle area. T-Mobile tested Intel hardware along with the Nokia 5G commercial AirScale System to build its first 5G network involving more than one vendor.
Likewise, Verizon Communications Inc. (NYSE:VZ) has also chosen Nokia as one of the vendors to provide equipment for 5G trials.
Nokia has also signed a patent licensing deal with Huawei Technologies Company., Ltd. Some analysts believe Nokia’s fourth-quarter 2017 earnings report will include a non-recurring catch-up payment related to this agreement.
Like Microsoft And Intel, Nokia Can Redefine Itself
At its peak, Nokia achieved a market cap of over $245 billion — one of the largest market caps in the world at the time. Today, that market cap stands under $29 billion. By becoming a major player in 5G, Nokia can regain the respect of consumers. The stock currently trades just under $5.00 per share.
Such a comeback would place Nokia stock in the league of Microsoft Corporation (NASDAQ:MSFT) and Intel. Both companies initially declined as their core offerings became less popular. Today, however, both have diversified into other products and returned to a growth trajectory.
Like Microsoft and Intel, Nokia has not entirely abandoned its former core product. The company has returned to the mobile phone market in a licensing deal with HMD Global. Although Nokia has little chance of dominating this market again, it will still serve as a revenue source.
Unlike Microsoft and Intel, however, Nokia stock trades more than 90% lower than its all-time high. This drop was of course bad news for long-term holders. For prospective buyers, however, it means that they can buy in while the stock trades at under $5 per share and profit from the advent of 5G.
These buyers could enjoy profits several magnitudes higher than those who bought into MSFT’s and INTC’s comeback.
Final thoughts on Nokia stock
Nokia’s February earnings report should provide not only EPS numbers but also news on how the company’s comeback has progressed.
When the company failed to enter the smartphone arena, Nokia stock fell heavily out of favor. During its period of decline, however, Nokia has acquired Alcatel-Lucent and redefined itself as a hardware provider.
Now, as a 5G buildout begins, Nokia products are appearing as a core component of this major upgrade.
With the stock trading below $5, now could become the perfect time to buy at a low price and profit from the next quantum leap in wireless technology.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.