Finnish tech company Nokia (NYSE:NOK) has lost much of its luster since the heady days of the early 2000s. The thought of Nokia stock trading above $50 is practically unimaginable, at least for the foreseeable future.
But while Nokia’s not a giant in the technology space, the company offers an interesting value proposition as a 5G-network play. Nokia isn’t entirely dependent on its 5G segment. However, it’s undoubtedly an essential component of the company’s current business model.
And fundamentally, based on the company’s first-quarter financial results, Nokia isn’t doing too badly. That’s not exactly a ringing endorsement, but the share-price beatdown may have been an overreaction.
If that’s the case, then there could be a prime opportunity in Nokia stock.
5G Momentum and Nokia Stock
Nokia President and CEO Rajeev Suri provided the usual corporate positive spin as the company released its quarterly earnings data.
As we might expect, Suri accentuated the positive, saying, “Nokia’s solid first quarter results showed broad year-on-year profitability improvements as our transformation and product cost reduction efforts started to take hold.”
That’s certainly an instance of seeing the glass as half-full. On a quarterly basis, Nokia’s operating profit/loss, operating margin percentage, and diluted earnings per share were all negative.
But hey, at least those metrics all showed year-over-year improvement. And there is some merit to the CEO’s claims of “solid first-quarter results.” For instance, quarterly net sales of 4.913 billion euros isn’t a bad result at all.
Moreover, Nokia managed to eke out quarterly diluted earnings per share of one cent (in euros). That’s an improvement over the loss of two cents per share posted during the comparable quarter of the prior year.
The star quarterback on the fiscal team, though, was (and still is) Nokia’s 5G business segment. In that vein, the company’s quarterly report proudly displays in an easy-to-read font, “5G deal momentum continues, with 70 commercial deals and 21 live networks.”
Staying on the Cutting Edge
In case you didn’t get the memo, Nokia really wants you to know that it’s doing well in its 5G business. Going forward, the company intends to “accelerate our product roadmaps and cost competitiveness through additional 5G investments in 2020.”
Thus, investors can expect Nokia to continue developing its 5G segment. The “additional 5G investments” for this year weren’t precisely clarified in Nokia’s quarterly report. Regardless, it will be interesting to see what innovations the company comes up with.
And in fact, Nokia is already pushing the envelope in this area. The company recently achieved 5G speed of up to 4.7 gigabits (billions of bits) per second. That’s a world record, and it’s further evidence that Nokia intends to position itself as a market leader.
There are broader implications here as this could be a victory not only for Nokia, but also for America in its quest to compete with China in the 5G race.
That’s because Nokia’s 5G-speed record took place “on base station equipment being deployed in major U.S. carriers’ commercial networks.” Nokia is headquartered in Finland, but the U.S. might consider this event a quasi-American achievement as well.
At the very least, we can assert with confidence that it’s a big win for Nokia. LightCounting Market Research Chief Analyst Stéphane Téral tends to concur with this, saying, “This is a substantial achievement that reflects the careful workings of a brilliant and subtle team with the deepest appreciation for detail and circumstance.”
No doubt, that “brilliant and subtle” team earned those accolades. But regardless of who gets the credit, it’s Nokia that’s likely to profit from its aggressive foray into the Wild West of 5G-network technology.
The Takeaway on Nokia Stock
Should Nokia stock be considered nothing more than a 5G investment? Not really, but the company plans to continue investing in this essential business component. And if you’re bullish on 5G, then perhaps you should be bullish on Nokia as well.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
