Finnish communications equipment supplier Nokia (NYSE:NOK) is known far and wide as a leader in the 5G revolution. As Nokia continues to advance its state-of-the-art software and network equipment on a global scale, investors can stake their claim in this hyper-growth company through a long position in NOK stock.
I’ve been bullish on NOK stock for a while, though I’ll be the first to admit that my timing hasn’t always been perfect.
For instance, I issued a recommendation on NOK on Aug. 24, and the share price slumped soon afterwards.
Hopefully you’ll forgive me for that. I also declared NOK stock a strong buy on Oct. 12, after which the share price floated upwards but then plummeted.
Today, I’m tripling down on my bullish call on NOK stock. Fortunately, this time around I’ve got a significant piece of news to back up my prediction. Just be sure to take my judgment, and the judgments of all other commentators, with a massive grain of salt.
A Closer Look at NOK Stock
Suffice it to say that NOK stock has been on a wild and unpredictable ride in 2020. Due to the onset of the novel coronavirus, international political tensions and other issues, NOK shareholders have had to endure an unsettling series of ups and downs.
The lowest point this year occurred in March, when NOK stock plunged to a gut-wrenching low of $2.34. The recovery from that price was swift and powerful, though, as NOK climbed to an impressive 52-week high of $5.14.
Be advised, however, that there has been some retracement from that price, with NOK stock set to open today at just around $4 . Still, November has mostly shown bullish price action for NOK and the momentum is clearly to the upside for the time being.
To present a complete picture, I’d like to offer a cautionary note at this point. The trailing 12-month earnings per share for NOK stock is currently around -19 cents. The bulls will definitely want to see that number turn positive, hopefully in 2021.
Bad News for a 5G Rival
Nokia’s two chief rivals in the international 5G network connectivity space are Sweden’s Ericsson (NASDAQ:ERIC) and China’s Huawei. I’m bullish on both Nokia and Ericsson, but not so much on Huawei.
Throughout the Trump administration’s tenure, there’s been palpable tension between the United States and China. The administration’s actions to block Huawei’s access to semiconductor chips have been well documented.
On the other hand, it’s possible that those tensions may subside in a Biden presidential administration. Yet, this doesn’t mean that Huawei’s problems are over and done with.
Indeed, the pressure on Nokia’s Chinese rival this time around comes not from the U.S., but from the United Kingdom. Reportedly, the U.K. government is mulling a ban on the installation of Huawei’s 5G equipment as early as next year.
More Room for Nokia
That’s terrific news for Nokia’s stakeholders as it could offer the company a greater share and less competition in a sizable market.
Moreover, the potential for a duopoly between Nokia and Ericsson is only increasing as the U.K. plans to spend the equivalent of $333 million to help carriers replace their Huawei 5G technology.
This is undoubtedly discouraging for anyone invested in Huawei’s success, but it’s massively bullish for NOK stock holders. It presents Nokia with an opportunity to expand its already considerable presence in the U.K.
It’s possible that BT Group (OTCMKTS:BTGOF), Britain’s largest mobile operator, saw these anti-Huawei developments coming. And perhaps it’s no coincidence that BT Group chose Nokia, not Huawei, for a lucrative contract to supply 5G radio equipment.
The Bottom Line
If Huawei gets phased out of the U.K., that’s bullish for the two other main competitors in 5G connectivity equipment.
That puts NOK stock holders in a great position as Nokia already has a strong foothold in the U.K. market. Thus, regulatory pressures could provide a tailwind to the NOK share price over the long term.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.