From tech titan to meme stock, it’s been a weird, wild journey for Finnish technology company Nokia (NYSE:NOK) over the years. In early 2021, folks who held NOK stock got a quick, unexpected bump from Reddit users, even if they didn’t ask for it. In my Portfolio Grader, I give NOK stock an “A” grade.
For steady, sustainable returns, however, Nokia’s shareholders shouldn’t rely on the meme-stock mob. What they’ll need, more than anything, is progress and leadership from Nokia.
That’s not a tall order nowadays, we must admit. Even as the world’s recovering from the Covid-19 pandemic, a microchip shortage is evidently wreaking havoc on the technology market.
Can Nokia survive and thrive amid this challenging backdrop? To get answers to this billion-dollar question, we’ll check the fiscal data to see if Nokia can deliver when the chips are down, so to speak.
NOK Stock at a Glance
Long gone are the days when NOK stock traded in the $50s. Like the company itself, the stock doesn’t generate the hype that it once did on Wall Street.
There was a brief flash of hype, though, when meme-stock traders apparently targeted Nokia for a short squeeze earlier this year.
It’s hard to prove that Reddit users caused this rally. However, there wasn’t any company-specific news catalyst that would explain such a sharp price move.
Amazingly, NOK stock ran up from $4 to $9.79, only to collapse right back to $4. That type of price action has “meme stock” written all over it.
Fast-forward to November, and it’s good to see that the stock is slowly and steadily recovering from that incident.
As we move towards 2022, $6.50 and $7.25 will be important levels to monitor. Also, keep your eye on the daily trading volume. You’ll want to see that metric increase along with the share price.
Working Through the Chip Challenge
Like it or not, we can’t just ignore the reality of the world’s supply shortages. The global semiconductor supply deficit has been especially problematic for tech businesses.
Nokia’s Pekka Lundmark is certainly not dismissing this issue.
In an interview, Lundmark cautioned, “At the moment, we are limited by semiconductor availability, that will affect Q4 and it’s quite possible that this challenge will get bigger before it starts getting better.”
So, don’t expect NOK stock to stage a huge rally in the next couple of months. Again, sustainable growth is the key here.
Lundmark reassured Nokia’s stakeholders that the company is “working every single day with the suppliers on all levels of the organisation and I have also been personally involved in these discussions.”
Besides, it’s not as if Nokia isn’t moving its products. Lundmark observed that, during 2021’s third quarter, Nokia achieved 2% constant currency net sales growth despite global supply chain constraints and other headwinds.
5G Is the Key
Furthermore, Nokia achieved comparable operating margin of 11.7% during the third quarter.
On top of all that, the company reported profit from continuing operations of 342 million EUR ($393 million). That result is significantly better than the 193 million EUR ($222 million) from the prior-year quarter.
How can Nokia thrive during a worldwide chip crunch?
Much of the company’s ongoing success can be attributed to Nokia’s investments and innovations in the area of 5G connectivity.
Take, for example, Nokia’s collaboration with TPG Telecom. In this partnership, Nokia is launching the world’s first live 5G stand-alone, 700-megahertz service in Australia.
With that, Nokia’s equipment will support 3G, 4G and 5G simultaneously across all of TPG Telecom’s low-band frequencies.
But again, even with innovations like this, the shareholders should allow some time for Nokia to fully capitalize on 5G’s development.
“The 5G market is still growing and we expect that it will still take a couple of years before it reaches its peak,” Lundmark clarified.
The Takeaway
There’s a worldwide under-supply of semiconductors, and Nokia will have to overcome this challenge.
Fortunately, it appears that the company is prepared to tackle this obstacle.
Moreover, Nokia is reporting strong financial stats, with help from the company’s commitment to 5G technology.
So, there’s no need to give up on NOK stock at all, as Nokia continues to prove that it’s much more than a short-squeeze target.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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