Nokia (NYSE:NOK) stock has had a horrible, terrible, no good and very bad decade. Since early 2010 the shares are down 70% in value, while the average S&P 500 stock is up 196%.
Everyone knows the story. The Apple (NASDAQ:AAPL) iPhone blew Nokia’s feature phones out of the water. The phone company’s devices division was acquired by Microsoft (NASDAQ:MSFT) in 2013, but its effort to come back as “Windows Mobile” failed and it was spat out like there was something dead in there.
What most don’t know is that Nokia then became an infrastructure company, supplying the radios and base stations needed to make things like 5G happen.
That hasn’t been working either.
Who Won 5G?
Over the last two years, while the 5G revolution has been gearing up, Nokia shares are down another 25%. Orders have simply been going elsewhere, to China’s Huawei, Korea’s Samsung Electronics (OTCMKTS:SSNLF) or Sweden’s Ericsson (NASDAQ:ERIC).
Computer equipment companies like Dell Technologies (NYSE:DELL), and networking companies like Cisco (NASDAQ:CSCO), have also been getting more orders from carriers. This is because 5G unifies the internet and communications space. Except for radios and base stations, mobile service is becoming part of the internet mainstream. This is squeezing suppliers like Nokia.
The last time it reported earnings, in October, Nokia called the third quarter “solid,” with net income of 267 million euros and revenue of 5.7 billion euros. One euro is worth about $1.10. This means less than 5% of revenue is hitting the bottom line in a good year.
Results have also been choppy. Nokia scored more revenue in 2018’s fourth quarter than in 2019’s third. It had negative margins in 2019’s first quarter. For the fourth quarter, to be reported Feb. 6, analysts are expecting Nokia to earn 14 cents per share, double the last quarter’s figure, on revenue of $7.5 billion.
Given those expectations, you might expect Nokia shares to be on a tear. They are not. They’re up just 5% so far in 2020, and up 10% over the last three months.
InvestorPlace’s Tom Taulli calls this the “fumbling of 5G.” Faisal Humayun, with characteristic understatement, says there are “better bets.” Vince Martin says that even the virtual blacklisting of Huawei by the U.S. government isn’t going to save Nokia stock.
I can’t disagree with any of them.
The Phones Are Not Nokia
Even the Finns are unhappy with Nokia (and they’re the happiest people on the planet). There’s a reason for the ire. A Finnish company called HMD Global now controls the Nokia brand of phones, producing a full line of Android products. HMD also makes earbuds, which are also branded through Nokia.
The main benefit Nokia gets from this, other than patent royalties, is end-user demand, mostly in developing countries like India where a 79 euro Android smartphone costs just 6,200 rupee. To make things more confusing, Nokia advertises the HMD phones on its corporate website.
The Bottom Line on NOK Stock
Nokia is a trader’s stock.
Right now, the technical indicators are setting up nicely for the shares. You may be able to get in ahead of earnings and, if they beat estimates, book a profit.
But this is not a stock for investors of any age. Nokia’s side of the mobile business, the infrastructure side, is highly competitive. Infrastructure companies are being squeezed by internet networking and cloud computing, which are taking more carrier spending.
It’s easy to be fooled by the name. It’s easy to be fooled by nostalgia. But don’t be fooled.
Dana Blankenhorn is a financial and technology journalist. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL and MSFT.