More than a decade ago, news about Nokia (NYSE:NOK) stock mostly focused on its smartphone business. After all, Nokia was once a king in this space … until Apple (NASDAQ:AAPL) came along with its game-changing iPhone in 2007 and usurped it. Although the company is no longer a smartphone leader, Nokia stock is still an appealing investment in 2020.
The reasons for bullishness just aren’t what you might expect.
Apple went on to become a trillion dollar company with the success of its iPhone; meanwhile, the former king faded. Since 2013, Nokia stock has traded choppily, mostly within penny-stock territory ($5 or under). But the action has never been truly extreme over the past seven years.
It appears all of that is bound to change soon, however.
The investment case for Nokia is heating up again. But the new catalyst for Nokia stock is not a direct comeback to the smartphone world. Rather, it’s the company’s network infrastructure business that has investors hyped again.
Why Nokia Stock Belongs on Your Radar
5G prospects seem as good of a reason as any to justify a long-term position in a company. But, as InvestorPlace advisor Matt McCall explains in his expert breakdown of the “5G Highway,” not all 5G opportunities are created equal.
When looking at 5G stocks to buy, it’s important to consider the bigger picture and determine how the company in question plays into it.
After posting an earnings beat and improved 2020 guidance in the face of novel coronavirus headwinds, the case for a comeback in Nokia is only gaining traction. But there are greater reasons for long-term optimism toward Nokia stock.
Over the years, Nokia has repurposed itself as a key player in communications infrastructure. At the forefront of 5G, Nokia will help enable the future innovations of all the other big tech names. This includes movements towards autonomous vehicles, smart cities and widespread internet of things implementation. (Just to name a few.)
Nokia might no longer be a traditional tech leader, but it can redeem itself through its role in 5G.
Building the Case for Nokia as a 5G Stock
A key advancement in the bullish case for Nokia stock has been the trade war between the U.S. and China. This dispute intensified with the ban of Huawei — one of China’s key 5G players — equipment by the U.K.
As of 2019, Nokia had 16% of the world’s marketshare of telecom equipment revenue, while Huawei had 28%. With the ban of Huawei in effect, Nokia — a Finnish company — will undoubtedly leach much of the Chinese company’s past U.K. revenue in 2021 and beyond.
Although it might not surpass Huawei in overall marketshare, the Chinese company’s ostracization should help tighten the gap. In fact, InvestorPlace Market Analyst Thomas Yeung estimates that Nokia stock may have 120% upside thanks to the U.K. ban.
But this is only one reason many consider Nokia a viable 5G play.
As a 4G “road builder,” Nokia stock gained “only” 33% from 2009 to 2019. With Huawei losing influence in the U.K. and new developments in its own 5G technologies on the way, there’s plenty of reason to justify more investor enthusiasm in Nokia’s 5G prospects.
While it might not be a key benefactor of the 5G revolution in the same way that many of the stocks in McCall’s 5G Highway Super Portfolio are, Nokia now has a much clearer shot at becoming a stronger 5G road builder.
Specifically, Nokia recently announced a deal with Broadcom (NASDAQ:AVGO) to boost the effectiveness of its 5G solutions and save money in the process. InvestorPlace contributor Larry Ramer offers a succinct breakdown of what the new technology might achieve:
“The chips that Nokia is developing with Broadcom, called SoCs, are cheaper, smaller and use less power. By the end of 2020, Nokia is looking to incorporate the SOCs into more than 35% of its 5G equipment. By the end of 2022, it aims to power 100% of its 5G equipment with the new chips.”
SoC stands for system on chip.
All of these recent developments help bolster the case for Nokia’s long-term success as a player in the 5G world.
The Bottom Line on Nokia
It’s no longer a smartphone king, but Nokia can pave a new path with its shift to 5G. This path could ultimately prove much more lucrative and enduring for the company in the long run.
This is especially true since many of the game-changing technologies other companies are developing today will rely on the incredibly fast data transfer that 5G infrastructure and technologies enable. As a necessary part of this movement, Nokia stands to reap plenty of rewards.
Only time will tell if newly appointed CEO Pekka Lundmark (as of Aug. 1) will make Nokia a king again. But Nokia stock now has plenty of long-term catalysts in place to justify a position on your radar.
Add to that the recent earnings home-run and an improved outlook for 2020, and it’s no wonder many are starting to think about Nokia as a viable investment again.
But if you’re looking for the most profitable stocks to buy on 5G prospects, road builders like Nokia are just the tip of the iceberg. Investors can discover the “Amazon of 5G” … the “Microsoft of 5G” … and the “Netflix of 5G” in new companies developing revolutionary technologies to make the most of our hyper-connected future.
Matt McCall — the chief technology analyst at InvestorPlace — has curated The 5G Highway Super Portfolio … a tactical approach to investing in 5G that maximizes short-term and long-term gains. In his special report, he uncovers the 5G equivalents of the hottest tech behemoths and more.
With a proven track record in making calls on then up-comers Amazon (4,147% gain), Microsoft (45,371% gain) and Netflix (27,713% gain), McCall and his research team have demonstrated the know-how needed to sift through the 5G duds to find the real gems. He’s found companies at the forefront of key 5G revolutions: movements in driver-less cars, virtual reality and remote surgery … just to name a few.
Robert Waldo has been a web editor for InvestorPlace.com since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.