Is Nokia Just a Meme Stock? Or Is It Worth Investing if You’re Looking For More Exposure to High-Tech Equity?

Last Updated on July 29, 2021

MyFinancialTimes is a reader-centric site. We may receive compensation from the products and services we mention or recommend in this story, but the opinions are the author's own. Remuneration may impact where offers appear. We may not include all available products or offerings. To learn more you can visit our advertising policy and editorial policy.

Nokia Corp., (NYSE: NOK) is a multinational telecommunications company, headquartered in Helsinki, listed both on its native country’s exchange (Nasdaq Helsinki) and in Paris, on the Euronext exchange, as well as on the New York Stock Exchange. 

After events of recent days, one has to say that the pros of at least a modest investment in NOK outweigh the cons, for those investors looking for more exposure to high-tech equity. The con is that it has a reputation as a ‘meme stock,” and the the masters of memes might carry it too high too soon, leading (as such things do) to disappointment. 

The pro side, though, is that the company will be in a good position to survive its own meme-intact and overcome any such rise and fall because it has executed a sound plan in recent months. It is about to reap the fruits of those plans in operational terms.   

Around the turn of the millennium, Nokia played a big part in the development of the modern consumer electronics industry. For a time it was the largest vendor of mobile phones and smartphones. 

But by around 2010, the predominant view of Nokia was that its glory days were behind it

Now, though, in 2021, two very different things have happened to make Nokia “hot” again. The more superficial of them is that Nokia has become a “meme” stock, one of those stocks adopted by the Reddit crowd, who buy and so force the price of their favored stocks upward — just to prove that they can. 

The second development, though, is that analysts far from the meme-making crowd have discovered that Nokia is a company of real operational merit, one that has skillfully remade itself into a network infrastructure concern.

It has become a leader in 5G. Indeed, in 2020 its stockholders sacrificed dividends so that the company could put its cash flow to work on research and development in this field.    

What is 5G?

The term has become all-to-familiar as a bit of jargon, but it is worthwhile getting back to its core meaning. The term “5G” stands for the fifth generation technology standards for broadband cellular networks.

Most current cellphones are still working on 4G networks, although 5G deployment began in 2019. The new standards will apply, by some estimates, to more than 1.7 billion subscribers worldwide by 2025.  

As of early February this year, Nokia had secured 195 commercial agreements participating in the rollout of 5G technology using its network infrastructure. It has pledged to invest millions of USD through 2023 to facilitate smooth transitions from 4G to 5G. Some analysts believe that Nokia is on the way to becoming the go-to infrastructure solutions provider in this transition. 

Earnings and Stock Price

In June, Goldman Sachs’ analysts upgraded NOK. This month, JPMorgan’s did likewise, in large part in each case because of the awareness that 5G has become a strategic priority around the globe. Western countries, wary of possible Chinese dominance in the field of 5G infrastructure, are turning to Nokia.  

Nokia, as it happens, purchased the last U.S. based network infrastructure concern, Alcatel-Lucent, in 2016, in what now seems like a far-sighted move. 

Nokia held its quarterly stock earnings call this week, announcing that its net profits were more than three times what had been expected, €351 million rather than €107 million.  Its profits in the second quarter of 2020 were only €99 million. 

On the basis of this earnings call its stock price soared. At the close of trading on July 28, Nokia (NYSE) was worth $5.81 a share. Within minutes of the opening on July 29, it was selling for $6.22, an increase of more than 7%. 

It gave up some of that gain later in the trading day, but over the afternoon found a new equilibrium above $6.