Electronics manufacturer Nokia (NYSE:NOK) is the Rodney Dangerfield of the telecommunications arena. On stage, like the old-school stand-up comic, Nokia stock would wear a black suit, struggle to loosen the red tie and boldly assert “I don’t get no respect.”
Dangerfield got laughs for years with his character. Nokia stock is performing in front of an even tougher audience – investors – and they are barely smiling.
This is too bad, really, because the company is a viable alternative in the 5G sweepstakes that comes without the baggage of geopolitical intrigue. Nokia has won some 100 contracts, an accomplishment worthy of note. But, Nokia tried and failed to land a major one. Accordingly, the market is keeping score and holding down the stock price.
Which means a bold investor should consider buying the stock.
What is Holding Back Nokia Stock?
Nokia stock has been priced in the upper reaches of penny-stock status since late 2019. It’s 52-week high, $5.28, does not instill shock and awe. Its low, which occurred in the dismal month of March, was a brief visit to $2.34. Mostly, Nokia stock has hovered around $4 and $5.
Nokia, a historic company based in Finland, was known worldwide for its mobile phones – until the smartphone revolution. The company pivoted to produce telecommunications equipment, specifically targeting 5G and the opportunities that this global conversion offers. The competition is stiff. Nokia faces large rivals and fierce jockeying over available contracts. Besides its reputation for quality, Nokia’s customers surely also appreciate the fact it is based near Helsinki, not China.
That concern likely played a major role in the decision by BT, the largest telecom in the United Kingdom, selected Nokia to be its largest infrastructure provider. “In a fast-moving and competitive market, it’s critical we make the right technology choices,” Philip Jansen, CEO of BT, said of the decision.
Nokia will provide 5G products and services for BT’s 11,600 radio sites, CNBC reported.
The company inked 17 new contracts in the third quarter. Yahoo Finance recently reported that TipRanks puts Nokia’s share of the 5G market at about 15%. Nokia’s market share was close to 20% last year, and the decline is a factor in the stock’s price.
The Verizon Opportunity
A contract to provide 5G equipment for Verizon (NYSE:VZ) would have been a major score for Nokia. This high-profile deal would have given Nokia stock the fuel to escape penny-stock status and likely brought other customers its way.
Instead, Verizon is another weight holding down NOK.
At stake was a $6.64 billion contract to provide 5G equipment for Verizon’s operations in the United States. Verizon chose Samsung (OCTMKTS:SSNLF). A big one got away.
An article by Reuters described the Verizon action in mid-September as “a setback” for Nokia. In July, JPMorgan noted that Nokia was at risk of not getting the contract as Verizon moved to diversify its list of suppliers.
Verizon’s action does not mean the company is turning its back on Nokia. Far from it. Nokia remains a major provider of services and gear to Verizon.
But not getting the latest 5G deal was a blow. Worldwide headlines of “setback” and “loss of contract” certainly influence potential investors. NOK’s price reflects this investor reluctance. The subdued vibe makes an upward journey for Nokia stock more difficult.
Still a Value Play
Last week, InvestorPlace colleague Chris Markoch asked a good question: What more does Nokia have to do?
“Despite a nearly universal consensus that its shares are undervalued, Nokia can’t seem to sustain momentum,” he wrote on Oct. 7. About the price dip that followed, Markoch added, “a drop of 18% seems a bit extreme when you consider how big the 5G pie is.”
Markoch is on to something that value investors should not overlook. There is a lot of 5G conversion work to go around, and the volume is going to get larger, not smaller. In addition, Nokia has a track record of satisfied customers. That relationship is not marred by the type of security concerns that are surrounding rival Huawei.
In August, I wrote in InvestorPlace that there were good reasons for Nokia stock to be on a value investor’s shopping list, including a new CEO: “There’s room for Nokia to grow and prosper in the years ahead.” now, two months later, my view remains the same.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.