- Meme stocks are suffering this week with AMC, GME, NOK all down.
- Nokia has retreated from nearly $10 to sub-$4 in 2021.
- NOK shares fall again in Wednesday's pre-market.
Nokia had been one of the behemoths of the early mobile phone generation, the Apple of its time, but NOK completely missed the move to smartphone dominance. For a time, Nokia was the biggest cap stock in Europe and dominated the EuroStoxx 50 market. If Nokia went up, so did the broader market. Gradually though the smartphone took over, and Nokia missed out through poor decision-making and lack of urgency. In June 2000 Nokia's share price was $62 dollars. Now it is $3.98!
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NOK stock forecast
Now Nokia looks to the arrival of 5G as a possible way of recapturing former glories. Recent retail investor enthusiasm seems to have grasped this possibility. The NOK share price rose from $4 to nearly $10 in the height of the meme stock boom. Nokia does generate reasonable revenue, but it is stuck. Revenue in 2016 was $23.6 billion, and by 2020 this had dropped to $21.8 billion. Nokia's P/E is not historically that bad at 13 versus a sector average of 20. The forward P/E is also similar at 14.
Nokia has been signing multiple deals as it seeks to prepare itself for the advent of 5G. It has announced agreements with Clearworld, Antina in Singapore, AT&T, Google Cloud, Du in Saudi Arabia, and Microsoft among others. Nokia has also announced a massive cost-cutting plan with large job losses, reducing its headcount from 90,000 to approximately 80-85,000 in the next 18-24 months. Nokia says it expects to lower its cost base by $600 million by the end of 2023.
Clearly ambitious plans, but is it achievable? Communication networks are notoriously capital intensive, and network providers have overpaid in the past for 3G and 4G licenses. Nokia is hoping 5G will return it to its preeminent position. To do so it may need to borrow and invest in research and investment, and the company says the cost-cutting measures will enable further spending here. Clearly, it has the business know-how and contacts to do this, but it is a long-term plan that will not see fruition overnight. Some reassurance has also been provided by Nokia issuing guidance out to 2023 and restating 2021 guidance. Nokia does deserve a small chance, and I would buy some Nokia for a medium to long-term play. I would not bet the house on it, but the potential upside outweighs the potential downside in my opinion.
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