Stocks to buy

Expect Big Gains for Nokia as It Raises Its Full-Year Guidance

Telecommunications giant Nokia (NYSE:NOK) has seen a healthy run-up in its share price. NOK stock has delivered a remarkable 33% return to its shareholders in the past three months.

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After an impressive start to the year, the company’s management expects to raise its full-year guidance. Nokia’s turnaround story is well and truly in motion.

NOK stock has been slow to move in the past year; its price stuck around $4 for the longest time. However, with a solid first quarter and substantial investments and partnerships in the 5G realm, it’s back in business. Nokia still has a long way to go before it catches up to its peers, but it appears to be on track for massive gains in the not-so-distant future.

The stock’s price is incredibly cheap based on the majority of its price metrics, including its price to sales ratio of just 1.2x. With that being said, let’s dive a little deeper into Nokia’s story and assess the strength of its bull case.

5G Breakthrough

In recent years, one of the biggest criticisms of Nokia was its inability to score major 5G contracts. However, with increased investment and focus on 5G services, it is now a big winner with several contracts.

In June, Nokia announced a partnership with Ligado Networks to develop 5G base station radios for enterprises and mobile operators in the United States. It also launched its industry-leading AirScale 5G portfolio in June. Furthermore, Nokia inked a patent licensing deal with automotive giant Daimler to provide mobile telecommunications technology.

The company has also been selected by T-Mobile Netherlands to enhance its digital transformation. The goal is to reshape T-Mobile’s network into a service-centric platform that effectively caters to 5G demands. Nokia will also modernize T-Mobile Netherland’s Dense Wavelength Division Multiplexing network.

On top of that, Nokia has collaborated with NetNordic to deliver 4G- and 5G-ready solutions to petroleum refining company Equinor (NYSE:EQNR).  Finally, Nokia has partnered with Türk Telekom to deploy Turkey’s first commercial private 4.9G/LTE network. Nokia will provide managed services, solution designs and deployment as part of the deal.

Positive Outlook Ahead for NOK Stock

According to Nokia’s management, the company saw continued strength in its business during the second quarter. Hence, they expect to revise upwards their previous outlook ranges for 2021. The previous outlook for 2021 was for net sales to fall between €20.6 billion to €21.8 billion, along with comparable operating margins from 7% to 10%.

Nokia is riding a 5G upgrade cycle and just had a stellar first quarter. It saw a healthy increase in demand for its network infrastructure and mobile networks segments. After adjusting for currency changes, sales looked great with a 9% increase year over year.

President and CEO Pekka Lundmark recently shared that he is optimistic about the company’s path to improved profitability. “We are progressing well with our three-phased plan to achieve sustainable, profitable growth and technology leadership laid out at our Capital Markets Day in March,” he stated. Lundmark believes that 5G’s peak will be significantly longer than 4G, putting Nokia in a stronger position for sustained growth.

Final Word On NOK Stock

NOK stock was a sluggish mover in the past year, but it has finally broken free of its shackles. The stock gained handsomely after the company’s recent positive developments in the 5G realm and its exceptional first quarter.

Nokia’s outlook for the second quarter is even better as it prioritizes its 5G presence. Trading at just 1.2 times forward sales, NOK stock is a screaming buy at current prices.

On the date of publication, Muslim 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

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University. 

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