There are four reasons to buy Nokia shares

05. 08. 2020 Wednesday / By: Robert Denes / Business / Exact time: BST / Print this page

Also, read the analysis below that shows you four reasons why you should buy Nokia shares. 5G leader with stronger quarterly results, new company management and director Pekka Lundmark, Nokia significantly improved cash from operations, 2 live network deployments ... etc.

  • Nokia's results confirmed the strong growth in 5G's market share.

  • Inventories underestimated the current level.

  • Purchasing Momentum can track Ericsson’s inventory and send the inventory higher.

  • Impressive customer win in 5G Powered by ReefShark.

    1. New leadership

    Nokia’s new leadership is a positive catalyst for the withdrawal of shares in the coming weeks. Former CEO Rajeev Suri has done his best to manage Nokia through the Alcatel-Lucent acquisition. For the past six years, and five years before that, the Nokia Siemens Network has led Nokia.

    The future CEO, Pekka Lundmark, has two decades of experience as a venture capital partner. He has worked as a leader in an energy company and in the heavy machinery service provider market. Through its extensive experience, Nokia will be the leader in the application of 5G and Industry 4.0 (automation). Although the introduction of 5G is in the early stages, peak sales will ultimately reduce Nokia’s revenue growth. It may be years later, but Lundmark needs to come up with a plan to sustain the company’s long-term prospects.

    The CEO said: "Currently, the challenge is against satisfaction and acceptance of the status quo." If you see that Nokia is complacent, then when stocks are stimulated, inventories will reach $ 10 or higher sooner than expected.

    2. Strong second quarter

    Nokia has significantly improved cash from operations. Net cash rose to 1.6 billion euros ($ 1.89 billion), while total cash rose to 7.5 billion euros (8.85 billion dollars). The quarterly positive free cash flow of $ 313 million suggests the company will return its dividends earlier than expected. As the stock recovered due to the dividend cut, Nokia will have to delay the repayment of the dividend. Ericsson’s (ERIC) dividend is just 7 cents, with a yield of just 0.59%.

    To expand its leadership position against Huawei and have a larger market share than Ericsson, Nokia will have to buy back the shares at the current level. You need to increase your cash to increase research and development spending as needed. 5G Powered by ReefShark sounds great with customers. Increasing marketing efforts and product development will ensure a 35% delivery target sooner than the year-end target.

    3. Buyer wins

    Nokia posted 83 commercial 5G deals and 32 live network deployments in the second quarter. Its shipment forecast is ~100% by the end of 2022:

    Data courtesy of Nokia's Q2 Earnings Call Presentation

    Investors may anticipate Nokia raising the strong pace of 5G shipments highlighted above. Such a strong win rate suggests that Nokia will not trade in the single-digit price point for much longer. It will take a few analyst upgrades to give the stock a lift.

    The discipline to avoid low margin deals will lift profit margins, as Nokia expects to end 2020 with a ~27% market share of the 4G+5G mobile radio market.

    CEO Rajeev Suri said, "we ended the quarter with more than 220 customer projects underway using our new FP4 chipset and around two-thirds of those projects involve either new footprint for Nokia or Nokia displacing a competitor." At this pace of market share growth, Nokia is trading at too much of a discount...read more


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