Nokia (NYSE:NOK) is turning into something of a comeback kid among technology stocks. The company dominated the global smartphone market before the iPhone and Android smartphones kicked it to the curb. Nokia left smartphones behind — although the brand lives on through phones manufactured by HMD Global, and the company also collects patent royalties from other smartphone makers. NOK stock plunged as the iPhone took over, shedding 96% of its value over 5 years.
However, in 2021, Nokia shareholders have had their revenge. The growth in NOK’s stock this year has significantly outpaced that of the iPhone maker’s: 53% compared 32%, respectively.
That strong growth presents a bit of a quandary for potential investors. With NOK up 53% in 2021, is there any room for meaningful long-term gains?
The company has been very successful with 5G networks and infrastructure. It sees that as a stepping stone to what it calls 5G+, which is where the real money may be.
Time for a dive into what Nokia means by 5G+ and just how big this market could be. If the company is right, 2021’s impressive gains may be just the start of a full-fledged Nokia resurgence.
Nokia Is Looking to 5G+ to Fuel Ongoing 5G Revenue
Before getting into the details, the term 5G+ needs to be clarified. Cellular providers have been using the 5G+ label to promote millimeter wave spectrum 5G service (the faster version). Nokia is using 5G+ to describe something very different: “5G+ is the new enterprise ICT and industrial operations technology (OT) infrastructure, designed to revive latent demands and trigger a new phase of growth across our physical industries.”
Bell Labs (Nokia’s research arm) sees edge cloud infrastructure, automation, remote sensing, robotics and other ICT (Information Communication Technology) needs driving commercial adoption of 5G. We’ve been focused largely on consumer adoption through the purchase of new 5G smartphones, but Nokia is looking at an even larger market: commercial.
Bell Labs’ projections for the size of that market have enormous implications for Nokia’s future growth. They also point to continued growth in NOK stock’s value. It estimates that the global consumption of ICT technology will grow from the $2.8 trillion spent in 2020 to $6 trillion by 2030. Of that $6 trillion in spending, Nokia thinks 75% of it — $4.5 trillion — will be spent on 5G+ technologies.
As a company that provides the 5G infrastructure and equipment needed to support this shift, Nokia stands to be a big beneficiary.
Nokia’s top three divisions for revenue, by a wide margin, are Mobile Networks, Network Infrastructure and Cloud and Network Services. These divisions have driven the growth in NOK stock as telecoms race to build out 5G networks. And if the company’s projections are correct, it will continue to make investors very happy as commercial adoption of 5G+ technology ramps up.
The Bottom Line on NOK Stock
Are you convinced that Nokia’s vision for 5G+ could become a lucrative reality? If so, NOK stock would definitely be a long-term growth contender.
The potential is clearly there.
A wide range of industries is rapidly becoming more connected. Nokia’s 5G network and infrastructure solutions are positioned to benefit from this transition. In hindsight, Nokia probably deserved a spot on my Internet of Things (IoT) stocks to buy list earlier this year.
However, Nokia’s vision for 5G+ and its $4.5 trillion in ICT spending by 2030 is just that at this point — a vision.
Companies may not buy into that vision, especially given the capital costs that will be involved. And even if they do, Nokia is hardly alone in providing the 5G network equipment needed to make it a reality. In addition, the company — like so many others — says it has concerns about the potential impact of semiconductor shortages into 2022.
In 2021, Nokia proved that it can be a significant player in the 5G market. Royalties and licensing revenue from smartphone patents and Nokia-branded phones are also on the rise. If the company can maintain its momentum and leverage it for 5G+, this Portfolio Grader “B”-rated stock looks to be a strong growth performer going forward.
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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