Nokia Oyj (ADR) (NYSE:NOK) reported quarterly numbers recently, and they weren’t that good.
But the market didn’t seem to care. Despite largely missing expectations across the board, revenue being flat year-over-year, gross margins dropping, operating margins dropping, and earnings dropping, NOK stock has still traded higher in the days following that report.
Is NOK stock just lucky? Or is there something else behind this upward momentum?
For all intents and purposes, the bull thesis on Nokia stock rests almost exclusively on the forthcoming 5G boom. NOK has invested heavily to make sure that it is properly exposed to and ready to benefit from that boom. Everything else right now is just background noise leading up to that boom.
So what is next for NOK stock?
This stock can and will head higher as it leads into its biggest catalyst in recent memory.
Here’s a deeper look.
Nokia and the 5G Boom
When you mention Nokia, most individuals think of the company’s old phone business which never gained much traction.
But that is old news. That old phone business is gone. Nokia sold it to Microsoft Corporation(NASDAQ:MSFT) back in 2014.
Today, Nokia is a technology infrastructure company that is a pure play on two huge forthcoming trends: 5G and the Internet of Things (IoT).
Broadly speaking, Nokia provides the equipment which is the technology underpinning data transfer and storage around the globe. As we all know, data is exploding thanks to the mainstream emergence of IoT.
In every market, from appliances, to phones, to watches, to clothes, there seems to be a smart device which tracks something important. All those devices need a means to produce, store, and transfer data.
That is where NOK comes into play. It provides those means.
More critically, 5G is coming, and that is a huge tailwind for NOK. The company is already a leading player in the 4G/LTE broadband market, so it will naturally be a big winner in this massive forthcoming 5G-upgrade cycle. Over the next several years, demand for new 5G-integrated products and technology components will soar, and NOK’s numbers will start to look a lot better.
From this perspective, it is easy to see why investors largely ignored the quarterly numbers. They were just near-term noise. Everyone is looking toward the 5G boom, and until something happens to negatively affect that catalyst, NOK stock should head higher.
Nokia Stock Could Get Above $7
Management is very confident about its ability to fully capture benefits from large-scale 5G deployment globally over the next several years. Revenue growth is expected to inflect into positive territory. Margins are expected to start expanding, and earnings are expected to head higher.
In other words, Nokia stock is turning into a growth story.