In recent years, Nokia Corporation (NYSE:NOK) was largely an overlooked stock. In fact, the company began to lose its investor appeal when its mobile phone business started slowing down more than a decade ago. Nokia eventually sold its mobile phone business to Microsoft Corporation (NASDAQ:MSFT) in 2014.
However, earlier this year, NOK suddenly became a trending ticker. Due to a short squeeze combined with meme stock frenzy, NOK stock skyrocketed on January 27. Nokia stock reached an intraday high of $9.79 per share, which more than doubled its closing price of $4.73 per share from the previous trading day. Notably, the trading volume during that surge was extremely high.
Obviously, without much change to the company’s fundamentals, a spike like that is hard to sustain. Indeed, NOK stock quickly returned back to Earth and is, at the time of this writing, trading at $4.13 apiece. The trading volume has also fallen to be in line with its historical levels.
With hindsight being 20/20, some investors might regret not getting into Nokia stock early and selling at the top. But here’s the thing: all that noise aside, Nokia Corporation could represent a solid opportunity to 5G stock investors right now.
Nokia Corporation (NYSE:NOK) Stock Chart
Chart courtesy of StockCharts.com
You see, while Nokia is no longer making cell phones, it remains one of the major players in the network equipment market. And 5G deployment could become a major catalyst for NOK stock.
According to its latest investor presentation, Nokia had 195 5G commercial agreements as of February 4. Moreover, the company is already powering 45 live 5G networks around the world. (Source: “Financial and Operational Highlights in Q4 2020,” Nokia Corporation, last accessed February 18, 2021.)
Nokia estimated that, in full-year 2020, its 4G and 5G mobile radio market share was approximately 27% to 28%, excluding China. (Source: “Report for Q4 and Full Year 2020,” Nokia Corporation, last accessed February 18, 2021.)
With these numbers, it shouldn’t come as a surprise that 5G has already started benefiting Nokia’s business. In its latest earnings report, the company said, “Overall, we saw growth in radio access products in Q4 and full year 2020, with growth in 5G partially offset by decreases in legacy radio access products.” (Source: Ibid.)
It helps that Nokia has already declared more than 1,300 5G essential patents and is expanding its research and development to new areas, such as consumer products and Internet of Things solutions. As 5G enters the main stage, Nokia’s patent licensing business should get some tailwind as well.
Of course, as evident by the Nokia stock chart and the now “back-to-Earth” share price, Nokia Corporation’s growth isn’t that obvious just yet. In the fourth quarter of 2020, the company generated €6.6 billion of net sales, which was down five percent year-over-year. On a constant-currency basis, though, Nokia’s net sales actually rose one percent year-over-year.
At the bottom line, Nokia’s adjusted earnings came in at €0.14 per share for the fourth quarter, which was down from the €0.15 per share earned in the year-ago period.
Other than during the frenzy at the end of January, Nokia stock does not get much investor attention.
However, Nokia Corporation is part of the 5G revolution. And with the recent pullback in its share price, this could be an opportunity for investors to pick up a solid 5G stock on the cheap.