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It's no longer the year 2000, and Nokia Oyj (ADR) (NYSE: NOK ) is not dominating the world in mobile phone handsets sold. However, NOK stock - up nearly 9.5% year to date - has been resurrected.
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Much of the optimism in Nokia stock is related to a combination of factors, including Nokia's recent updates to its 5G network.
Combined with the company's February unveiling of an Internet of Things network grid as a service, Nokia no longer resembles the company that lost its grip on global mobile phones sales to Apple Inc. (NASDAQ: AAPL ) and Samsung Electronic (OTCMKTS: SSNLF ).
Nokia Stock Still Has Potential
All told, ahead of the company's first-quarter fiscal 2017 earnings report, Wall Street has warmed up to Nokia's growth prospects. The Finish-based company will announce its financial results on April 27 before the opening bell.
For the quarter that ended March, Wall Street expects the company to earn 3 cents per share on revenue of $5.75 billion, translating to flat growth and 2.5% improvement, respectively.
In the fiscal fourth quarter, reported in February, Nokia reported revenue of $6.7 billion, which grew 14% sequentially. Notably, Nokia's gross margin rose to 40.6%, up from 40.1% in Q4 2015 and 37.2% in Q3 2016, thanks to a combination of aggressive cost improvements and operational efficiency.
These operational gains put the company on track to produce $3.3 billion in operating profits by 2020. As such, analysts from both Morgan Stanley and Charter Equity upgraded NOK stock last month.
Nokia's management, which continues to target long-term operating margin of about 13%-14%, hasn't downplayed Wall Street's expectations. Management forecasts 2017 to be a turnaround year in networks, where the company has spent the past couple of years rebuilding and rebranding its business to capitalize on growth opportunities - particularly in data traffic management.
Meanwhile, the company has already created a buzz by relaunching an updated version of the iconic 3310 - which some industry pundits regard as the greatest phone ever made - and still believes it can drive higher revenue and profits in hardware, too.
Nokia will launch several mobile handsets this year, according to Digital Trends' supply chain reports. One such device is the Nokia 9, which will reportedly launch in the third quarter and will be priced at $699.
The device, which will come with a Snapdragon 835 processor by Qualcomm, Inc. (NASDAQ: QCOM ), will target the high-end smartphone market, featuring 6GB of RAM and a choice between internal storage of 64GB or 128GB.
What Nokia can gain in mobile devices remains to be seen, but investors in NOK stock now deserve a second look.
Bottom Line for NOK Stock
Nokia still faces risks, but the company has cleaned up its books with extensive cost-cutting measures and is now profitable, and no longer strapped for cash.
NOK stock is priced at 16 times fiscal 2018 earnings per share estimates of 32 cents, compared to 18 P/E of the S&P 500 index. Combined with Nokia's 3.48% annual dividend yield, there are tons of reasons to be patient with this stock.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
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