Markets did not expect Nokia Corp. (NYSE: NOK) would even meet consensus estimates but the company did better than that. It reported earnings and revenue that beat estimates. The company also declared a higher dividend. Nokia is now in the zone with the 5G rollout.
Valuation
Along with another dividend increase likely this year, Nokia’s growth in networking is playing out well for income and growth investors. It is building on the strength of last year’s business momentum. Nokia Technologies generated €1,6 billion last year in revenue. So at a 10x P/E, the business is worth €16 billion. Adding back €4.5 billion in cash and the company value, net of Networks, would be €20 billion.
There are disappointments to Nokia’s report, too. Revenue fell 2% as its market grew by only 2%. Pivoting the business to 5G is a multi-year timeline that started a few years ago. Competitors like Huawei will pressure Nokia and the industry.
Takeaway
Nokia could potentially double if it continued to report stability in its lines of businesses. As 5G demand picks up, Nokia must compete with Chinese firms. In the meantime, it must cut costs and boost efficiency to win business from them.
