The firm, which was once the largest mobile handset maker in the world, let its competitive advantage in that market slip and barely survived a costly overhaul of its operations. The rebound in fortunes comes from the firm changing direction and management steering operations into networks and away from handsets. That change by Nokia was done at an opportune time. As a result, the Nokia share price rallied by a super-impressive +150% in the months between March 2020 and December 2021, making Nokia stock a rewarding investment.
There are good reasons to suggest Nokia stock could continue to build momentum. It has once more established a dominant position in a growth market with a global audience as it plays a crucial part in the rollout of 5G mobile networks.
The 5G sector has the feel of an oligopoly about it, even more so since security fears about China’s Huawei resulted in it falling out of favour with Western political leaders. Markets with few competitors operating within them and significant barriers to entry can generate abnormal long-term profits for those companies with a stake in them. The below Nokia stock forecast draws on technical and fundamental analysis to outline the reasons to buy Nokia and how to find the best time to do so.
Nokia Corporation (NOK) Share Price 2018 -2022
Source: IG
Who are Nokia (HSE: NOKIA; NYSE: NOK)?
Nokia’s move away from handsets and into networks is not the first radical change of direction in the company’s history. In its home country of Finland, where it is known as Nokia Oyj, the firm which the rest of the world know as Nokia Corporation started life as a timber yard/pulp mill.
It started trading in 1865 and has repeatedly jumped from one growth sector to another. The switch which brought it to investor attention was when it forged a position as the world’s leading mobile phone handset maker. It managed to hold on to the #1 spot until 2012 when it was dethroned by Samsung, but more importantly, Nokia management realised their performance had been poor, so they scrambled out of the business entirely.
Its primary listing is on the Nasdaq Helsinki exchange, trading under the ticker NOKIA. In an effort to accommodate international investors, Nokia is also listed on the New York Stock Exchange in the form of an American Depositary Receipt (ADR) under ticker NOK.
Most good brokers offer their clients the opportunity to buy either the Helsinki or New York listed shares. As the Tokyo listing is priced in euro, those with accounts that aren’t denominated in the euro do need to factor in that total returns in the locally listed shares will include an element of forex price moves and price moves in the underlying stock itself.
ADRs are USD denominated and allow investors to essentially buy the same stock on the exchange, which is more convenient for them (in dollars). Therefore, this Nokia stock forecast will use data and reports relating to both company listings.
Nokia Fundamentals
Source: IG
Nokia Balance Sheet
Source: IG
Highlights from the 9-month financial results up to 30th September 2021 include:
- Nokia Oyj (ADR) revenues increased 3% to EUR15.79bn
- Net income applicable to common stockholders excluding extraordinary items increased from EUR176m to EUR954m
- Revenues reflect Nokia Software segment increase of 18% to EUR2.13bn
- Nokia Technologies segment increase of 11% to EUR1.13bn
- North America segment increase of 6% to EUR5.13bn
- China- segment increase of 19% to EUR1.14bn
Where Will The Nokia Stock Price Be in 3 Months?
Tech stocks had a ‘good’ pandemic, and Nokia’s exposure to an exciting growth market helped it more than double in value; however, the start to 2022 saw some investors begin to take profits. Central banks are increasingly moving towards introducing interest rate hikes, and inflationary pressures could also eat into disposable income levels among consumers.
Nokia may be insulated to a greater extent than some of its rivals as the mobile networks it produces and maintains are business-to-business operations and multi-year projects. That being said, it is unlikely to be immune to market-wide nervousness about tech valuations.
Any short-term price weakness in Nokia shares will offer new entry points for traders and investors who are willing to ride out short-term noise.
Nokia Corporation (NOK) Share Price 2019 -2022 – Resistance Price Level of $5.74
Source: IG
Two key technical indicators for Nokia investors are coming into play: the January 2019 high of $5.74 and the Simple Moving Averages on a 20-, 50- and 100-day scale. The price high was tested on 21st December 2021, but the Nokia share price soon fell. That was in line with the rest of the tech-sector shedding value simultaneously, but it means the resistance line is yet to be breached.
The SMAs are still aligned in a bullish pattern with the 20 above the 50, above the 100, Daily SMA. A test of the 100 SMA would represent a buying opportunity for those with the patience required to wait for price to reach that area.
Nokia is by no means a target of short-sellers. As of the end of December 2021, short interest in the stock was a modest 0.74%, equating to approximately 2.1 days of average daily trading volumes.
One potential red flag for those looking to buy into the stock, which blurs the 3-month Nokia stock forecast, is that short interest increased in December of 2021. The value of Nokia short positions in the run-up to the end of the year reached $267m, and the last time there were so many bets against the company was January 2021.
It is worth noting that this additional shorting coincided with the Nokia share price reaching the previously mentioned resistance price level of $5.74. That could be explained by short-term speculators taking short positions as the stock approached such a significant potential inflexion point.
Where Will The Nokia Stock Price Be in 1 Year?
Whilst increased short-term price volatility can’t be ruled out, the news out of Nokia HQ remains positive in terms of medium-term stock valuations. The taps have been firmly turned on in terms of new revenue streams and point towards a positive Nokia stock forecast for 2022.
On 28th October 2021, the firm released stellar quarterly results, which go a long way to explain why the price of Nokia stock had risen by 16.4% by the end of the year. The good news keeps on coming, and on 11th January 2022, the firm offered further guidance to investors which raised the prospect of 2022 being a year when the rollout of 5G networks would further boost revenue streams.
Details within the announcement made on 11th January show that Nokia expects its operating margin for the financial year 2022 to range between 11% to 13.5%: applying the average number of that range (12.25%) to the $25.4bn of forecast sales results in operating profits of $3.11bn.
Supply-side issues, particularly a shortage of chips needed to support the 5G network, helped suppress the Nokia share price in the early parts of 2021. Without the necessary components being available, it was plausible to ask the question, Nokia stock, buy or sell?
Efforts made by the firm to expand its pipeline of chips included the enrolment of Broadcom Inc (AVGO) as a business partner in June 2021. This means Nokia now uses chips from three different suppliers with market-leading operations Marvell Technology Group Ltd. (MRVL) and Intel Corporation (INTC), also helping Nokia get over this bump in the road.
These moves by senior management to diversify the supply chain help manage operational risk but are also expected to drive down costs and improve Nokia’s profit margins. Reports suggest that as of December 2021, Nokia used custom chips in more than 35% of its 5G shipments, but by the end of 2022, that number is forecast to increase to 100%.
Nokia Corporation (NOK) Share Price 2020 -2022 – Supporting Trend Line
Source: IG
From a technical perspective, the boost to the firm’s prospects regarding chip supplies caused price to move some way above the longer-term supporting trend-line. It could be that Nokia ADRs come back to test that support level which currently sits in the region of $4.25. However, a more aggressive valuation factors in that the freeing up of chip supplies was a game-changer which suggests the shift in the Nokia share price is more permanent.
Where Will The Nokia Stock Price Be in 5 Years?
Extending the Nokia stock forecast up to 2025 and beyond continues to indicate reasons to buy Nokia stock now.
The current management team successfully managed the teething problems of 2021, and the new business structure appears better equipped to navigate the rollout of 5G. Instead of offering traditional end-to-end solutions in their networks, Nokia has moved to provide best-of-breed offerings on a case-by-case basis. This extra flexibility offers the firm a chance of competing with its larger rival Ericsson, while political concerns look set to limit the capabilities of the other major player in the sector, Huawei.
Given that the 5G market could rise to $667bn in value by 2026, any long-term stock prediction for Nokia boils down to how much of that market the firm can capture. Even relative underperformance compared to Ericsson could still be good for NOK shareholders as that growth in the 5G market represents a 1,526% rise in value from a 2020 base value
Thanks to the additional revenues coming in, the balance sheet is improving. There is even talk of the firm increasing its dividend payout to shareholders. Whether the firm chooses to invest its increased cash flow on internal projects or to support the stock price by returning funds to investors, Nokia stock predictions for the next 12 months point to a further potential upside.
Given the size of Nokia and its potential for tapping into one of the world’s major growth markets, many brokers cover the stock. The consensus among those 27 analysts is that Nokia Group Corp is a ‘buy’.
Nokia Oyj Broker Ratings
Source: IG
Who Owns NOKIA stock?
A wide range of institutional investors own Nokia stock. These banks and hedge funds have carried out their research and come up with Nokia stock forecasts encouraging enough for them to invest hundreds of millions of dollars worth of capital into the company.
Officially reported positions in 2021 included Artisan Partners Limited owning $354m of NOK stock. Bank of New York Mellon owns $137m, Arrowstreet Capital $123m  , and Cavalry Management Group own $36m. There is one clue that investing in Nokia is skewed towards the higher risk-return end of the spectrum. Compared to some other companies in the tech sector, Nokia has more hedge funds than traditional investors, such as pension funds ranking in the table of top ten investors by position size.
Is Nokia a Good Stock to Buy?
You might not have seen a Nokia phone handset for some time, but whether you’ve switched to Samsung, Apple or LG, your mobile phone experience is still likely to be reliant on Nokia technology. Its move to a behind the scenes role and the development and maintenance of the 5G network has so far generated positive returns for shareholders, and there could be more to follow.
Will Nokia Stock Go Up?
A fall in value can’t be ruled out thanks to the threat of changes to global interest rates and inflation levels. But Nokia’s B2B business model and long-term contracts offer a relative degree of protection to any economic downturn. There is still plenty of potential upside for Nokia shareholders, particularly if relationships between Beijing and the West continue to freeze rival Huawei out of the market.
Medium and long-term revenue projections mean that some of the more aggressive Nokia stock price targets put an $8 valuation on the stock. Short-term share price weakness can be seen as a chance for those running buy-and-hold strategies to work into positions in one of the most exciting large-cap stocks in the market.