Many may see Nokia’s (NYSE:NOK) strong performance during 2021 and chalk it up entirely to its association to the “meme stocks” trend. This investing phenomenon could have played a role in some of its wilder moves last year (it’s not for certain). Yet that’s not what enabled NOK stock to perform so well last year.
Instead, it was the success of both its turnaround and its efforts to secure 5G deals, that helped the stock, which has struggled for many years, to finally get out of its slump. Investors who skipped out on it, even after it briefly pulled back in the spring, may regret their decision.
Fortunately though, you haven’t missed the boat completely when it comes to investing in Nokia. Even though it’s up 52% over the past 12 months, and it has bounced between $5.50 and $6.50 for the past six months, the opportunity hasn’t completely come and gone here.
Why is that? There’s still a lot going on that could result in its shares making another big leap higher over the next 12 months. Perhaps there is even potential for it to hit multi-decade highs.
Here’s a closer look at what you might expect from NOK stock heading into 2022 and beyond.
What the Chip Shortage Means for NOK Stock
Last year was a banner year for Nokia, and not just because of the strong performance of its stock. Under the leadership of CEO Pekka Lundmark, the company successfully repositioned itself as a leading supplier of 5G telecom equipment. It also made progress with its restructuring and turnaround efforts.
However, the global chip shortage partially countered these positives. While this didn’t stop it from delivering solid results when it last reported quarterly numbers, this supply chain headwind has made investors more cautious about NOK stock.
With Lundmark making remarks like this issue “will get more challenging before it then starts getting better,” it’s easy to see why the market is taking such a “wait and see” view on shares.
Still, you can consider this already priced in. Not only that, this issue could start to improve by mid-year. Like I’ve discussed before, as this clears up, the company will be able to take full advantage of growing demand for its 5G equipment. This will, in turn, enable it to deliver even stronger results down the road.
That said, Nokia’s more than just a binary bet on the chip shortage ending sooner than expected. Two catalysts are on the table as well. Each of these works in tandem, and both could help shares continue to perform well this year and next year.
Why Nokia Is Headed Back to Double-Digit Prices
A resolution to the chip crisis could of course be a positive for NOK stock. Yet other catalysts could do the trick as well. First, let’s consider a catalyst that has been in play for quite some time: The completion of its cost reduction and restructuring efforts.
Early last year, Nokia provided investors with full details of its plans. This is more than just a mature company slashing costs, all while its business continues to shrink.
Yes, this is largely a cost-slashing effort. Nokia’s goal is to lower its annual cost by around €600 million (or $677 million) by the end of 2023. However, it’s putting much of this back into the business, by continuing to beef up its research and development (R&D) investments.
That brings us to the second additional catalyst: Nokia’s move into 5G+. A few weeks back, I broke down the details of its 5G+ game plan. In a nutshell, 5G+ is Nokia’s term for advanced Information Communication Technology (ICT). The company sees this as a key growth opportunity. 5G+ could materially increase commercial ICT spending through the start of the next decade.
Nokia is smartly taking the cost savings from restructuring and putting it to work in a way that could enable it to dominate a new frontier in its industry. Success with this may enable the company to finally shake off its “dinosaur” reputation.
Even before this endeavor starts to pay off, increased progress with it could help to boost this stock.
The Verdict on NOK Stock
Earning an “A” rating in my Portfolio Grader, things are just getting warmed up with Nokia. The resolution of the chip crisis could pave the way for blockbuster results — perhaps as soon as the second half of 2022.
Not only that, but the completion of the company’s cost reduction plan is on the horizon. Using the savings from this, this telecom equipment provider, written off as a has-been and as an also-ran, could become an innovator once again. That is, of course, assuming its big bet on 5G+ pays off.
I consider NOK stock a buy because it was a winner in 2021, and its has great potential to stay a winner in 2022 and 2023.
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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