On January 31, Nokia (NYSE:NOK) announced that it, along with Ericsson (NASDAQ:ERIC), had been selected by Orange (NYSE:ORAN) to provide products and services for the rollout of 5G in France. Although the response from investors has been somewhat muted in the days since it does send a signal that NOK stock is likely to benefit from further wins by the Finnish provider of telecom hardware and software.
As I write this, Nokia is trading just below $4. With some more good news in the weeks to come, including a fourth-quarter report — February 6 before the markets open — that shouldn’t come with any big surprises, the momentum it’s gained since mid-November will carry through into the spring. Can NOK get to $5 or higher by April or May?
It did trade above $5 in October until the company’s board cut its third- and fourth-quarter dividend installments. When it reinstates the 5.6-cent dividend is anybody’s guess. To do so, would see an immediate jump in Nokia’s share price, likely back into the $5s. So, yes, it’s possible, but that doesn’t mean it’s probable.
As I stated in November, Nokia’s dividend was the reason to own its stock. Without it, most investors should steer clear of it. However, for speculative investors, the 5G contract in France is proof governments and wireless carriers haven’t lost faith in it.
What Does Orange’s Contract Mean for Nokia?
The contract calls for Nokia to provide antennas and professional services to the west and southeast regions of France, where it already provides 2G, 3G, and 4G technology. I suppose you could look at the narrow regional focus as a bit of a letdown, but it’s better than nothing.
“Nokia will initially support Orange’s 5G commercial launch by enabling the rollout of its state-of-the-art SRAN network to 5G through software upgrades, streamlining the initial steps to build 5G. It will also introduce 5G New Radio (5G NR)-based AirScale hardware, and software for the new 5G frequency bands,” stated Nokia’s January 31 press release.
The reality is that Orange is going with both Nokia and Ericsson in the regions of France, where the two companies already supply technology on the mobile radio access network (RAN). This agreement with Orange grows Nokia’s market share in France while further strengthening its relationship with the company.
It is a big one, but it needs more.
To move Nokia past $5 toward $10, it has to get other telcos in Europe and elsewhere to announce similar agreements. In the months ahead, Nokia speculators better hope more of these agreements are forthcoming.
The Bottom Line on NOK Stock
Nokia’s stock has made gains in each of the past two months. Up slightly early in February, a third consecutive month of gains is in the works.
In early January, I argued that the skepticism surrounding Nokia was lifting. The Orange contract certainly helps my argument. In turn, the Orange business should result in more optimistic projections from analysts over the next few quarters regardless of whether it reports sales and earnings declines in its Q4 2019 results.
None of my InvestorPlace colleagues are enthusiastic about betting on Nokia stock. I continue to ward off anyone but the most aggressive investors. It’s not for the faint of heart.
The next time I write about Nokia, the fog will have lifted surrounding its latest results, making it a little easier to survey the landscape. Without the dividend, I still won’t recommend it, but I might widen my audience to include investors other than the speculative kind.
For speculative investors, NOK stock remains a buy. Everyone else should continue to look elsewhere.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
