It’s been a rough year for the Finnish telecommunications company Nokia (NYSE:NOK). In 2019, NOK stock lost roughly 35% of its value due to the company’s disappointing revenue guidance.
Nokia also suspended its dividend so it could focus more on investing in 5G networks. That was probably the right decision from a business perspective, but it made the shares less attractive to investors.
Things are looking tenuous for NOK stock right now, but all hope is not lost. The company is still considered a strong buy on Wall Street and there is hope that the shares could rebound in 2020.
Listed below are four things that are going well for Nokia stock:
1. Nokia Could Benefit From the Backlash Against Huawei
One of the biggest things Nokia has going for it right now is the backlash against the Chinese technology company Huawei. Huawei is one of Nokia’s biggest competitors in the 5G space.
The U.S. claims that Huawei is a security threat and that its equipment could be used by the Chinese government to spy on citizens. For that reason, the Trump administration has been pressuring other countries to ban Huawei from developing their 5G networks.
No American company directly competes with Huawei, leading U.S. Attorney General William Barr to recommend that the government consider taking a stake in the Chinese company’s competitors, including Nokia. His theory is that investing in Nokia would prevent Huawei from dominating 5G.
The U.S. probably won’t buy a stake in Nokia, but the negative sentiment toward Huawei could still benefit Nokia in the long run.
2. Nokia Is Reshuffling Its Leadership
Nokia recently announced that it’s reshuffling its leadership team and eliminating its chief information officer position. These responsibilities have been absorbed by the company’s chief digital officer.
According to Nokia’s management, combining the two positions will streamline operations and make it easier for the company to roll out new initiatives. And Nokia plans to continue to find ways to improve its overall efficiency.
3. The Company’s Q4 Results Beat the Average Estimates
Wall Street is feeling more optimistic about Nokia after it released a positive Q4 earnings report this month. Nokia beat analysts’ average revenue and earnings estimates and delivered upbeat guidance for 2020.
That came as a pleasant surprise for investors, who were disappointed by the company’s Q3 results. In October, Nokia cut its earnings outlook for the rest of the year. Its Q4 earnings beat came as a result of the company’s cost-cutting measures and strategic initiatives.
4. Nokia Has Landed Several Large 5G Deals
Nokia has a real opportunity available when it comes to the growing demand for 5G. In 2019, the company signed deals with global providers to introduce 5G networks across Australia, New Zealand, Egypt, Saudi Arabia, Norway, Switzerland, and South Africa.
But the company will continue to face challenges. Nokia is not immune to the trade war between the U.S. and China. And the company’s revenue has declined considerably over the past couple of years.
That being said, if Nokia can find a way to capitalize on the 5G opportunity, a turnaround could be in store for the company. And the company’s low share price could provide an attractive entry point for new investors.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.