Finnish company Nokia became a meme target in January 2021. Since then, its ticker has been trending on Reddit’s main discussion boards. Recently, the company reported above expectations third quarter results, and the stock inched higher in post-earnings action.
Figure 1: Nokia headquarters in Espoo, Finland.
Yle
Despite Nokia stock having recovered well from the sharp drop that followed January’s “meme attack”, Wall Street analysts still believe in considerable upside ahead. Wall Street Memes briefly tells the story of this potential momentum stock.
(Read more from Wall Street Memes: Buy Snap Stock On The Dip, Say Wall Street Experts)
From tech gem to meme
Nokia was considered a tech gem in the early 2000s. The company once controlled 50% of the smartphone market, but it lost its relevance in the space to the likes of Blackberry (BB) – Get BlackBerry Limited Report first and Apple (AAPL) – Get Apple Inc. (AAPL) Report later. Today, Nokia mostly provides mobile and fixed network solutions.
The Finnish company disappointed investors early in 2019, when it largely failed at riding the 5G upgrade cycle for several quarters. Competition with Ericsson and Huawei for 5G contracts proved to be too fierce for Nokia to handle.
However, Nokia’s President of Mobile Networks Tommi Uitto recently sounded much more optimistic about the 5G space. He said that “5G and Enterprise are driving growth in Mobile Networks. We are still in early stages of the 5G cycle, which has an extended peak”.
For the past five years, Nokia stock consistently traded between $3 and $5 per share, with the eventual spikes and dips in share price eventually correcting. The notable exception happened on January 27 of this year.
On that day, Nokia climbed to $6.55 per share, from only $3.87 two weeks earlier. The stock was the “victim” of a bullish WallStreetBets meme attack when short interest reached a five-year high of 60 million shares – fertile ground for a short squeeze.
However, after that, Nokia stock lost momentum and dipped back to the $4 levels until late April. Since then, between ups and downs, the stock rallied as high as $6.29 per share at the start of August. NOK’s performance year-to-date has been a respectable gain of 42%.
Figure 2: NOK stock chart on October 28.
Google Finance
Q3 results above expectations
On October 28, Nokia reported above-expectation third quarter financial results. The Finnish telecom group delivered non-GAAP EPS of $0.09 per share versus estimates of $0.08. Comparable operating profit of $734 million represented 30% improvement from the same period last year.
According to Nokia CEO Pekka Lundmark, a few factors can be credited for the company’s solid performance in the quarter:
“We delivered another great quarter driven by our increased investments in technology leadership and strong market demand. The highlight of the quarter was the launch of our next generation FP5 IP routing silicon – delivering up to three times more capacity while reducing power consumption by up to 75% per bit compared to previous generation.”
The company also provided an outlook for full year 2023. The table below shows projected acceleration across each business group between 2021 and two years from now:
Figure 3: NOK outlook for each business group.
Nokia Investor Relations
Wall Street is bullish on NOK
Experts are bullish on Nokia stock. Based on 8 analyst reports, consensus price target currently sits at $7.22 per share, representing 25% upside potential at last check. NOK has a moderate buy recommendation: 5 analysts rate the stock a buy, and 3 are neutral.
Kepler Capital analyst Andreas Schneider reiterated a few days ago his buy recommendation on Nokia stock. The analyst forecasts a $6.96 share price target, which points at 20% gain potential over the next 12 months.
Even more bullish is Craig-Hallum analyst Christian Schwab. He has a buy rating and $8 price target for 38% upside. According to him, the company should benefit from strength in fixed networks with robust demand. He sees sequential growth in mobile networks and cloud services.
Bank of America’s Didier Scemama is skeptical, but still sees upside ahead. The analyst recently initiated coverage on Nokia stock with a neutral rating and $6.91 target share price. Even in this case, 19% upside is a possibility.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)
