After spending months in the $5.00 to $5.20 range, Nokia (NYSE:NOK) roared ahead and cut past the 200 SMA (simple moving average). The Q2/2019 earnings report on July 25 caught investors off-guard. 5G demand rebounded from Q1 levels. The company’s quarterly revenue levels are cyclical: investors should expect short-term volatility with the long-term growth prospects intact.
Nokia benefited from strong 5G demand in Q2, allowing management to re-iterate its full-year 2019 guidance. On a year-over-year basis, Networks grew 5%, Nokia Software rose 8%, and Nokia Technologies rose 4%. Net sales grew 5% overall.
For full-year 2019, Nokia forecast earnings per share of EUR 0.25 – 0.29 (USD $0.28 - $0.32). The full-year 2020 looks even brighter, with operating margin (non-IFRS) expanding from 9-12% in FY 2019 to 12-16%. Recurring FCF rises from slightly positive to clearly positive. The market no longer has a reason to bet against the company. At 18 times 2019 earnings and 12 times 2020 earnings, investors should accumulate Nokia stock at prices below $6.00.
Valuation
Analysts have a $6.82 price target on Nokia stock. With Nokia leading the 5G implementation worldwide, this target is too low. More analysts may take notice of Nokia and could issue "buy" calls on the stock. This could send the stock to multi-year highs.
