Nokia Is a Stable Investment Despite the Reddit Hype

Reddit stocks continue to be a thing as we move into the latter half of the year. Despite some regulatory scrutiny, r/WallStreetBets is having a massive impact on returns. But not every meme stock is the same. There are some excellent stocks recommended by Reddit. One of the best examples is Nokia (NYSE:NOK) stock, which is up 30% in the last three months.

a backdrop featuring the Nokia (NOK) logo with a mobile phone featuring the Nokia logo on its screen in the foreground
Source: rafapress / Shutterstock.com

Granted, Nokia had a couple of rough years. No one can forget how it lost the smartphone battle with Apple (NASDAQ:AAPL). But that was in the past, Nokia’s future is solid with 5G. Seems not a day goes by without another Nokia 5G deal. Each successive quarter is better than the next.

CEO Pekka Lundmark has shown all the hallmarks of an aggressive boss since taking the helm from Rajeev Suri. And his leadership is paying dividends.

Despite all these positive catalysts, the stock still trades under $6. Reddit managed to power it to $9.79 per share. But now it’s back to a very reasonable valuation, trading at 1.3x price-to-sales.

Another Reddit spike may or may not happen, it’s most likely that it will not be considering the low short interest for NOK stock, but the Finnish multinational telecommunications giant is a stable investment in its own right.

NOK Stock: Rock-Solid Fundamentals

What sets Nokia apart from most meme stocks is its fundamentals. The past seven quarters are a testament to the success of the company in turning around its operations. And making sure the growth it has is sustainable and long-term in nature.

Nokia issues second-quarter earnings results on July 29, where it once again beat analysts’ expectations. Profit from continuing operations came in at €344 million, or 0.06 euros per share, versus €94 million and 0.01 euros a year ago. Comparable profit was €532 million, or 0.09 euros per share, versus €311 million, or 0.06 euros a year ago.

Quarterly net sales were also up 9% to €5.313 billion.

The company also increased its full-year guidance from a range of €20.6 billion to €21.8 billion to a range of €21.7 billion to €22.7 billion.

The Key Is Successful Management

For many investors, Nokia’s turnaround story is remarkable. Much of the credit goes to Lundmark. Under its new CEO, Nokia is steadily gaining market share with each passing day, making changes in its operating model, cutting costs, and aggressively pursuing 5G partnerships and deals.

“Our first-half performance has shown evidence of this in good cost control and also benefited from strength in a number of our end markets,” Lundmark said.

The fruits of his labor are paying off. there are a plethora of deals recently signed with the company. It is also benefitting from Huawei exiting several European markets. That means more market share and recurring cash flow for the Finnish tech giant in this geography.

Chinese success is another feather in the cap.

Nokia notably missed out on 5G contracts with all three major Chinese operators in 2020. But Lundmark has promised to bid on the second round of network tenders.

As a result, Nokia won its first 5G radio contract in China, securing a share in one of China Mobile’s (NYSE:CHL) three new 5G contracts, while Ericsson (NASDAQ:ERIC) was awarded a lower share due to an ongoing spat between the nations.

China Mobile published a document that showed Nokia Shanghai Bell had been awarded a 10.1% share in one of three 700MHz tenders, while Ericsson received 9.6% in another contract. Overall, Huawei picked up the majority of all three contracts, with ZTE also winning business, followed by a smaller domestic company, Datang Corporation.

Heading In the Right Direction

When things fall into place, the markets will reward you handsomely. Nokia’s management, led by Lundmark has taken efficient steps to place the company in the box seat. It was not that long ago Nokia was struggling against Nordic rival Ericsson. Product missteps in the early stages of 5G hampered growth and led to changes in its top management.

However, those things are now firmly in the rearview mirror. NOK stock has transformed into a very stable investment.

If you have a buy-and-hold strategy, it will not hurt to build up a good position in NOK stock.

On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan 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.


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