Despite the possibility of Nokia launching a new phone, called Nokia 8 and running Android, the stock is on a downtrend. At the $6.00 range, the stock will get more selling pressure in the weeks ahead. It is getting replaced on the CAC 40 index.
STMicroelectronics (NYSE: STM) will replace Nokia on the index causing funds that follow the index to sell the stock. Even though the share price is at where it was after its deal to sell the phone division to Microsoft, Nokia’s business is healthier and more focused. The company acquired Alcatel-Lucent in a bid to reaccelerate revenue in the networking market.
Nokia’s stock drop in the last few weeks is creating a buying opportunity for investors. Its main competitor, Ericsson (NYSE: ERIC), still has excess costs it must cut to become competitive. Conversely, Nokia already cut costs and is continuing to find efficiencies. The company will cut 600 jobs at its division in France.
The latest cost cut will lead to higher free cash flow.
Takeaway
Nokia’s multiple top on the chart at $6.50 a share played out. Now that the stock is at $5.99 and valued at a forward P/E of 16.4 times, value investors should look at NOK stock again.
