Nokia's Resurgence: Why Investors Are Buying

Nokia is a Finnish technology company that has been a leading manufacturer of mobile phones. However, in recent years, the company has shifted its focus towards telecoms infrastructure and 5G technology. This strategic move has made Nokia an attractive investment opportunity for several reasons. Firstly, Nokia has been successful in securing numerous deals and partnerships to support the global rollout of 5G technology. The company has signed agreements with major telecom providers and currently holds a significant market share in the 5G infrastructure market. Secondly, Nokia's stock price is relatively low, making it an affordable investment option for those looking to capitalise on the growing 5G market. Additionally, the company's new CEO, Pekka Lundmark, has a strong track record of delivering shareholder value. While there have been concerns about Nokia's financial performance and competition from other companies, the current outlook for Nokia as an investment prospect is positive.

Nokia's stock is a bargain

Secondly, Nokia's stock is currently undervalued. Its forward P/E ratio of 11.39 and other attractive valuation metrics make it a good pick for value investors. The stock's low price, hovering around 5 euros, makes it accessible to a wide range of investors.

Thirdly, Nokia has a new CEO, Pekka Lundmark, who has an impressive track record. Lundmark successfully led Finnish energy company Fortum, delivering significant shareholder value. His clear strategy and vision could be a positive catalyst for Nokia, potentially resulting in strong returns for investors.

Additionally, Nokia stands to benefit from the global rollout of 5G technology. As governments increase investment in 5G infrastructure and ban Chinese firms from bidding for contracts, Nokia is well-positioned to gain market share from rivals like Huawei and Ericsson. The company has already secured significant 5G deals with major telecom providers in the US, Japan, Korea, and Europe.

Furthermore, Nokia has a strong intellectual property portfolio, making it an attractive acquisition target for tech giants like Cisco. The company's patent portfolio has been a significant source of profits, and ongoing litigation with Chinese headset manufacturers could result in additional high-margin revenue.

Lastly, Nokia has demonstrated its ability to adapt and reinvent itself. After selling its mobile phone business to Microsoft in 2013, Nokia transitioned into a networking and 5G-equipment company. This strategic shift positions the company for future growth as the world embraces 5G technology.

In summary, Nokia's stock is a bargain due to its strong market position, undervalued status, promising leadership, 5G opportunities, intellectual property portfolio, and ability to adapt to changing market conditions. These factors make Nokia an attractive investment opportunity, particularly for those seeking value and long-term growth potential.

The company's new CEO has a strong track record

The company's new CEO, Pekka Lundmark, has a strong track record. He joined Nokia in 2020, delivering significant shareholder value at the helm of Finnish energy company Fortum through clear strategy and vision. If he can deliver the same at Nokia, there could be great returns for investors.

Lundmark's appointment comes at a time when Nokia is transitioning from a premier manufacturer of mobile phones to a 5G powerhouse. The company has already secured 100 5G deals and 160 commercial 5G engagements, with a significant footprint in all of the world's early 5G adopter markets.

Nokia's recent 5G wins demonstrate that its efforts to secure 5G contracts are beginning to pay off. The company has signed major 5G equipment agreements with BT, Verizon Communications, and NASA. Analysts believe that the proliferation of 5G technology will likely drive Nokia's growth in the coming years.

Lundmark's leadership and Nokia's transition to a 5G-equipment business could be a winning combination for investors.

Nokia's patent portfolio makes it an attractive acquisition target

Nokia's patent portfolio is vast, with over 26,000 patent families, and it is this extensive collection of intellectual property that makes the company an attractive acquisition target. The portfolio is comprised of patents from Nokia Technologies, Nokia Solutions and Networks, and Alcatel Lucent, which Nokia acquired in a $17 billion deal in 2015.

A significant portion of Nokia's patents are standard essential patents, which are vital for the implementation of industry standards. These patents need to be licensed on fair, reasonable, and non-discriminatory terms, providing Nokia with a steady source of revenue from over 100 licensees. This includes a patent cross-licensing deal with Chinese manufacturer Xiaomi Technology, which could open up new avenues for Nokia in the massive Chinese market.

Nokia's patent portfolio covers a wide range of technologies, including GSM, 3G radio, and 4G LTE, as well as Wi-Fi and video standards, and technologies that improve radio reception and enhance battery life. This diverse range of patents means that Nokia has been able to secure significant patent licensing deals with major companies like Apple, which paid Nokia $2 billion to settle a dispute over patent licensing.

In addition to generating revenue through licensing deals, Nokia's patent portfolio also provides the company with a competitive advantage in the telecommunications industry. As Nokia continues to drive consistent growth and compete with rivals like Ericsson and Huawei, its patent portfolio will likely continue to be a key asset, making it an attractive target for potential acquisitions.

The company is taking market share from its rivals

Nokia is taking market share from its rivals. In 2020, the company had 22% of the global network infrastructure market, with only Huawei and Ericsson larger. However, with the US and other countries banning Huawei from bidding for contracts, Nokia has been able to take more market share from its rival. In 2023, Nokia's fourth-quarter comparable operating profit rose to 1.15 billion euros, up from 908 million the previous year. This beat analysts' expectations and was driven by the company's ability to gain market share, benefiting from the 5G rollout in countries such as India.

Nokia's CEO, Pekka Lundmark, stated that the company's growth was broad-based and called India "the highlight of this story". He also noted that Nokia had diversified its customer base from network service providers to industrial customers who set up their own private 5G networks at power plants, utilities, and mines, among others. The company's net sales grew 16% to 7.45 billion euros, beating estimates of 7.11 billion euros.

In addition to gaining market share from Huawei, Nokia has also been taking share from rival Ericsson. This is despite Ericsson reporting lower-than-expected fourth-quarter core earnings and weak sales of 5G equipment in markets such as the United States. Nokia's success has been attributed to its more optimistic view of the Indian market and its ability to compete with Huawei.

Looking forward, Nokia expects another year of growth in 2023, forecasting full-year net sales of between 24.9 billion euros and 26.5 billion euros, implying between 2% and 8% growth in constant currency. Analysts expect net sales of 25.5 billion euros. This expected growth is underpinned by robust demand, particularly from business customers, and big contracts from Indian telecom operators for the launch of 5G in the country.

Nokia's success in taking market share from its rivals can be attributed to several factors, including the ban on Chinese firms like Huawei from bidding for contracts, the diversification of its customer base, and its ability to compete effectively with rivals like Ericsson.

Nokia's 5G deals show its efforts are paying off

Nokia has been making significant strides in the 5G space, racking up an impressive portfolio of deals and partnerships. As of 2020, the Finnish telecoms giant had signed 100 commercial 5G deals, totalling 160 commercial 5G engagements worldwide. This includes both signed contracts and paid trials with operators and enterprises. With its 5G radio access network (RAN) solutions, Nokia has established itself in all early-adopter 5G markets and secured contracts with major communications services providers in the US, Japan, and Korea.

One notable deal is with BT in the UK, where Nokia was chosen as the 5G RAN supplier for BT's EE network. This partnership positions Nokia as BT's largest equipment provider, supplying its AirScale Single RAN (S-RAN) portfolio for indoor and outdoor coverage. Additionally, Nokia has been gaining traction among enterprises, with private wireless deployments for companies like Deutsche Bahn, Toyota Production Engineering, and Sandvik.

Nokia's progress in 5G can be attributed to its focus on strengthening its mobile radio product portfolio during the transition to 5G. The company has also been at the forefront of 4G and 5G network slicing, enabling operators to deliver tailored, isolated 'slices' of the end-to-end network to their customers. This technology has been adopted by operators like Finnish Telia, who have been using 4G/5G network slicing since 2019.

The investments in 5G infrastructure by governments and operators present a significant opportunity for Nokia. With its market position and technological advancements, Nokia is well-poised to capitalise on the growing demand for 5G capabilities. The company's efforts in this domain are reflected in its ability to compete with rivals like Ericsson and Huawei, and its potential for future growth makes it an attractive prospect for investors.

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