Bet on Nokia's Recovery

Last week’s analyst upgrades from Raymond James and New Street gave Nokia (NYSE:NOK) stock a strong lift. For now, angry investors will tone down their desire to push out management. After last quarter’s disastrous results and a dividend cut, the rebound in the stock is unusual. Still, this year brings hope for the company.

Nokia continues to win big 5G contracts. Its business in China slowed, probably due to the US-China trade war. Now that the Phase 1 deal removes some major uncertainties, Chinese telecoms may resume the 5G build-out. This will help drive Nokia’s revenue levels higher. At a forward P/E of 15 times, the stock has a long way to go before it holds the $5.00 - $5.50 level.

On Jan. 30, Nokia’s quarterly results will renew bullish sentiment if the company reports a turnaround. New, unannounced deals for 5G will put an end to the bearishness on the stock. For 2020, Nokia should expect 5G driving revenues higher. As investors seek 5G growth plays, Nokia will show up at the top of the list. And once cash flow growth accelerates, the company will re-instate is the high dividend yield. This will bring back income investors who exited the stock last quarter.

Disclosure: the author owns Nokia stock.