The days when Nokia (NOK) handsets were all the rage are now a bygone era. The former market leader sold its phone business to Microsoft in 2014, and although today the Finnish tech company remains a major multinational telecommunications player, since the “glory years,” shares have been in decline.
However, following the coronavirus infected bloodbath, shares have been on a rally, and are up by 81% since bottoming out on March 16. Worries the momentum could be short lived surfaced recently when rumors began circulating that Verizon was planning to replace the company as its 5G supplier - a rumor Verizon has since denied.
In any case, Northland analyst Tim Savageaux believes the “degree of concern around NOKs prospects at VZ are overdone.”
Aside from brushing off the Verizon related concerns, Savageaux thinks Nokia’s rally has plenty left yet. The analyst believes Nokia’s recent entry into the Data Center switch market presents a sound opportunity and “serves as a timely reminder of the breadth and depth of NOK's technology capabilities beyond wireless.”
Expounding on this, the analyst said, “While we continue to find NOK shares compelling from a sum of parts perspective, given the positive impact of increased traffic demands across the company's IP/Optical and Fixed Access segments, as well as continued tailwinds from a marginalized Huawei, we also find the stand alone fundamental story compelling.”
Nokia’s entry into data center switching could be lucrative, as it is a market worth $15 billion. Nokia has already nabbed Apple as a customer for its new line of switching products, which includes the Nokia Service Router Linux (SR Linux) – the network operating system (NOS) that controls the switches – and the Nokia Fabric Service Platform (FSP) - an intent-based automation platform.
Savageaux believes the launch has “the potential to add to already meaningful traction with Cloud providers in DCI/Optical in both the US and China that account for a substantial portion of NOK's $1.5B+ in CY19 Enterprise revs.”
Accordingly, Savagaeux rates Nokia a Buy along with a $6 price target. The implication for investors? Potential upside of 35% from current levels. (To watch Savageaux’s track record, click here)
As for Nokia’s prospects among Wall Street’s analysts, opinions are mixed, with the bulls in the lead. 3 Buys and Holds, each, coalesce to a Moderate Buy consensus rating. With an average price target of $4.83, the analysts forecast upside of 8.5% over the next year. (See Nokia stock analysis on TipRanks)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.