Nokia (NYSE:NOK) stock is slowly getting on the nerves of the patient . While the shares of several tech companies are climbing at breakneck speeds, Nokia stock is meandering along at a sluggish pace. After a brief period trading over $5.00, the shares are now changing hands for around $3.50.
Granted, a few recent developments have not done Nokia stock any favors. Samsung Electronics (OTC:SSNLF) won a $6.65 billion contract to provide wireless communication network equipment to Verizon (NYSE:VZ) in the U.S. for the next five years. Meanwhile, T-Mobile (NASDAQ:TMUS) is using Telefonaktiebolaget LM Ericsson’s (NASDAQ:ERIC) equipment to enable 5G in New York City, with Nokia’s equipment relegated for use on the 4G network.
These developments come just as the company was building up some steam. In the last few quarters, Nokia managed to increase its operating cash flow, especially after its dividend was suspended. Its new CEO, Pekka Lundmark, has drawn praise after his predecessor, Rajeev Suri, received a lot of flack for becoming complacent about Nokia’s 5G position.
The 5G market is fairly large, since the whole world will eventually use it. So even though it may seem like Nokia’s piece of the pie is shrinking, it’s still a big slice.
Nokia stock is practically a steal at its current levels. I think investors should take the contrarian view and pour capital into the shares, especially when conservative analysts criticize it.
Nokia Remains Powerful
Regular readers of my columns will know I’ve been bullish on Nokia stock for quite some time. My view hasn’t changed. In fact, I believe that value investors who don’t buy the shares are forgoing a golden opportunity.
It’s important to note that 5G, is a marathon and not a sprint. As I mentioned earlier, the whole world will eventually shift from 4G to 5G. Although the pandemic has stalled the transition’s progress, it has also advanced the change in some ways .
In the U.S., it’s believed that approximately half the workforce is still working remotely. A majority of these workers want to continue doing so after the pandemic is over.
Further, consumers are streaming more content than ever since traditional entertainment outlets like concerts and movie theatres are still not considered safe. Carriers need more and better bandwidth to handle all that extra demand.
That brings us back to Nokia. While it’s true that the company lost a lot of contracts recently, there are several contracts it has won as well. Look no further than Europe, Nokia’s home market. Spanish carrier Telefonica (NYSE:TEF) and France’s Orange (NYSE:ORAN) are both buying their equipment from Nokia. Simultaneously, the company is also building an optical network in mainland China for the country’s State Grid Corp.
An Important Partnership
Much has been said about the Nokia-Verizon partnership. Undoubtedly, Nokia will be hurt by its recent loss to Samsung . But that doesn’t mean that Verizon has completely washed its hands of Nokia.
Just recently, Verizon tapped Microsoft (NASDAQ:MSFT) and Nokia to help its clients build private 5G networks. A private 5G network is a local area network that offers restricted, dedicated bandwidth using 5G-capable spectrum.
The networks will allow clients to automate their factory floor processes and run data-intensive applications. Overseas, where Verizon doesn’t have a presence, it will use Nokia to build private networks for manufacturing and logistics companies.
Nokia Stock Is a Deep-Value Name
There are several excellent articles on this website that will help you find genuine bargains that can pay back phenomenally over the long term. I believe Nokia deserves a place on this list, considering the stock trades at a forward price-earnings ratio of 12.30 times, while Ericsson, its next biggest rival, trades at 18.35 times.
I expect Nokia stock to rebound above the $4.00 support line and continue its ascent to $5 per share. And Nokia posted positive operating cash flow \in Q3. All signs point to a repeat in Q4.
As of the end of Q3, Nokia had $9.25 billion of cash and short-term investments. If it has anywhere close to the same cash when it reports its Q4 results, its dividend will likely be reinstated.
So, any way you slice it, there are plenty of reasons to invest in Nokia stock.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. He has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
