Headquartered in Espoo, Finland, Nokia (NOK) provides mobile, fixed, and cloud network solutions internationally. The company operates through four segments: Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies.
On June 14, 2022, NOK announced an FTTH deal with all-fiber service provider Wire 3 to accelerate the 10G broadband network build in Florida. Also, in the same month, NOK and Innventure collaborated to commercialize Nokia Bell Labs’ high-performance cooling technology for critical electronic equipment.
Through this collaboration, NOK’s versatile cooling technology might be offered to various companies in different industries.
On February 3, 2022, NOK’s Board of Directors initiated a share buyback program to return up to €600 million ($629.42 million) of cash to shareholders in tranches over a period of two years. The total cost of transactions executed on June 17, 2022, were €1,629,435.55 ($1,709,343) and after the disclosed transactions, NOK held 67,175,661 treasury shares.
Due to NOK’s solid fundamentals and mobile market growth, Citigroup’s (C) analyst Andrew Gardiner increased his price target from €6 ($6.29) to €6.50 ($6.82) and raised his rating from Neutral to Buy on June 14. Following this, the stock gained 2.8% during Thursday’s premarket trading session.
However, the stock has declined 7.7% in price over the past month and 23.6% over the past six months.
Here is what could influence NOK’s performance in the upcoming months:
Robust Financials
NOK's comparable net sales increased 5.4% year-over-year to €5.35 billion ($5.61 billion) in the fiscal 2022 first quarter, ended March 31, 2022. Its comparable gross profit grew 12.2% year-over-year to €2.18 billion ($2.29 billion).
The company’s comparable operating profit and profit for the period came in at €583 million ($611.59 million) and €416 million ($436.40 million), registering increases of 5.8% and 10.9%, respectively, from the prior-year period.
Favorable Analyst Estimates
Analysts expect NOK's EPS for the fiscal year 2022 (ending December 2022) to come in at $0.45, representing a rise of 2.3% from the last year. Also, its EPS is expected to grow at 14.2% per annum over the next five years. It’s no surprise that the company has topped the consensus EPS estimates in each of the trailing four quarters.
Furthermore, Street expects the company's revenue for fiscal 2023 (ending December 2023) to increase 2.2% year-over-year to $26.51 billion. Of the four Wall Street analysts that rated NOK, two rated it Buy, while two rated it Hold.
The 12-month median price target of $7.41 indicates a 61.4% potential upside from the last closing price of $4.59. The price targets range from a low of $6.49 to a high of $9.00.
High Profitability
NOK’s trailing-12-month EBIT margin of 8.98% is 9.7% higher than the 8.19% industry average. And its trailing-12-month net income margin of 7.00% is 31.1% higher than the 5.34% industry average. Furthermore, the company’s trailing-12-month ROCE and ROTC of 9.68% and 5.77% are higher than the industry averages of 7.67% and 4.76%, respectively.
Low Valuation
In terms of forward non-GAAP P/E, NOK’s 10.48x is 37.6% lower than the 16.80x industry average. And its 0.90x forward EV/Sales is 66.3% lower than the 2.66x industry average. Furthermore, the stock’s forward EV/EBITDA and Price/Book of 5.62x and 1.25x are lower than the 11.28x and 3.63x industry averages, respectively.
Power Ratings Show Promise
NOK's overall B rating equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value, in sync with its lower-than-industry valuation ratios.
NOK is ranked #10 out of 54 stocks in the Technology - Communication/Networking industry.
Beyond what I have stated above, we have also given NOK grades for Quality, Growth, Sentiment, Momentum, and Stability. Get all the NOK Ratings here.
Bottom Line
NOK reported impressive fiscal first-quarter results and affirmed full-year 2022 continued growth and profitability expectations. Furthermore, the company is well-positioned to benefit from its mobile market growth. So, it could be wise to invest in the stock now.
How Does Nokia (NOK) Stack Up Against its Peers?
NOK has an overall POWR Rating of B. One could also check out these other stocks within the Technology - Communication/Networking industry with an A (Strong Buy) rating: AudioCodes Ltd. (AUDC) and Extreme Networks, Inc. (EXTR).
NOK shares were trading at $4.59 per share on Monday afternoon, up $0.01 (+0.22%). Year-to-date, NOK has declined -26.02%, versus a -22.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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