Nokia (NYSE: NOK) rarely gets much attention. This puts value investors holding the stock at an advantage. As Nokia positions itself for the long-term growth in 5G, shares, which trade in the range of $5.25 - $6.00 for much of 2018, could break-out if the company reports better quarterly results in the next year.
In Q3/2018, Nokia reported operating profits falling 27% as net sales fell 1% Y/Y. Looking ahead to FY 2020, Nokia is raising its non-IFRS operating margin to 12-16%. EPS will top EUR 0.37 – 0.42. Recurring free cash flow will ensure the dividend will continue to yield at least 4%. Management will likely raise the dividend over the next three years as net sales grow at a CAGR of 9% - 12%.
Management’s operating margin forecast of 85% for full year 2020 is highly notable. Slowly but surely, the investment in Nokia Networks, after it merged with Lucent Technologies, will pay off. Nokia is by no means a player in the smartphone market but still has a hand in selling handsets. Its modest, global, exposure to the phone devices market complements its true goal of growing the network business. As telecoms around the world upgrade from 4G LTE to 5G, Nokia is at the center of the transition.
Disclosure: Author owns NOK shares.
