Markets are ignoring Nokia’s (NYSE:NOK) strong Q3 report. The 5G supplier is out of favor with the markets. It is not alone. Ericsson (NASDAQ: ERIC) is facing selling pressure and Cambium (NASDAQ: CMBM) is on a downtrend.
In Q3, Nokia posted revenue rising by a modest 2.1% Y/Y to EUR 5.4 billion. Supply constraints and the Mobile Networks in North America limited its growth in the quarter. The Networks Infrastructure and Cloud & Network Services unit are bright spots, with sales up 6% and 12%, respectively.
Nokia is outperforming investor expectations. To sustain a rally on stock markets, it needs to continue growing its revenue. Net cash is healthy.
Operating cash flow is strong, so Nokia may re-instate its dividend the next time the Board meets to consider it. Valuations are significantly better on Nokia stock than the competition. At a P/S of 1.2 times, Nokia is cheaper than Cisco (NASDAQ:CSCO) stock, which trades at over 4x. ERIC stock also trades at valuations similar to that of CSCO.
Markets are either over-valuing Ericsson or are too cautious about Nokia. Under its new leadership, Nokia proved it will expand operating margins. It is back on track to grow in the 5G market. Telecoms are upgrading the infrastructure. Nokia will win many of those contracts and the stock will respond by rising.
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