Lately, there hasn’t been too much excitement around Nokia (NYSE:NOK) — at least compared to the jaw-dropping spike it experienced during the “meme stock” phenomenon earlier this year. Or, the more gradual run-up that NOK stock saw during the summer, thanks to company-specific factors.
It seems that the meme crowd has turned their attention elsewhere. What’s more, investors who like fundamentals appear to have done the same. So, should you pass up on NOK? Not so fast. It will take some time for this situation to fully play out.
I wouldn’t buy NOK stock for around $5.70 today, hoping it rapidly surges back to its 52-week high of $9.79 per share. However, over time, the name has a strong chance of climbing again. Just like what played out over the summer, it will do so more on its own merits than perceived “meme appeal.”
Why? Because Nokia is putting in the work, securing 5G deals around the globe. For now, chip supply issues are holding it back. But once this crisis subsides — and as the demand is clearly there for its products — the company looks set to deliver materially stronger results within the next two years.
The Latest with NOK Stock
Based on the sideways trading NOK has been doing recently, you would think there’s little going on with the company lately. However, Nokia did have a bit of positive news late last month: a solid quarterly earnings report.
Despite headwinds from the global chip crisis, the company managed to beat earnings estimates for the September quarter, thanks in large part to demand for 5G equipment. For the quarter, operating profits were up 30% year-over-year (YOY). As for its full-year 2021 outlook, the Finland-based telecom company reiterated past estimates calling for net sales of 21.7 billion to 22.7 billion euros ($24.6 billion to $25.7 billion).
While these results did give NOK stock a brief boost the same day, it didn’t last long — hence my “sideways trading” comment. Shares continue to deliver middling performance in the short-term, as continued chip shortage headwinds weigh heavily on the minds of investors.
Admittedly, this will likely carry on into the months ahead. But again, Nokia is making the right moves when it comes to 5G. Along with its turnaround efforts, the company stands to see stronger results once supply-chain issues clear up.
Focus on What’s Ahead, Not What’s Happening Now
It’s easy to get hung up on the challenges holding NOK stock back right now. Even CEO Pekka Lundmark has stated that it’s possible this issue “will get more challenging before it then starts getting better.”
However, that’s not the only thing Lundmark has said about the situation. Along with this matter-of-fact assessment, he’s provided a silver lining: the demand for Nokia’s products. It’s simply a matter of getting through this semiconductor shortage. Once that’s in the rearview mirror, orders can be filled and sales will be made.
But that’s not all. Nokia could also continue to succeed in locking down 5G deals. So far, the company has made supply deals with 204 commercial end users and 72 operator networks. Interestingly, though — even as much of this U.S. and European success can be attributed to a key China-based rival being shut out of major Western markets — Nokia has also been able to strike deals in China. Add in the expected savings from its cost-reduction program and this company appears likely to deliver on its promises of sales growth and higher operating margins by 2023.
Today’s issues may keep NOK stock stuck between $5 and $6 for the time being. But within a few quarters, as it becomes clear that Nokia’s ambitious target will be reached? It won’t take long for the stock to get out of its current price rut.
The Bottom Line on NOK Stock
The meme trend may have briefly spiked Nokia’s popularity among traders. But for investors with a longer time horizon, there’s still plenty to like here. With demand still present for its 5G equipment, the company is set to “crush it” once it is able to realize its full potential.
While Nokia doesn’t anticipate things to be firing on all cylinders until 2023, you may not have to wait two years for NOK stock to take off again. In the coming year, this stock could see bullishness return in a big way.
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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