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The long-term risk-versus-reward potential of Nokia Oyj (ADR) (NYSE:NOK) stock remains a strong topic of debate, especially considering Apple, Inc. (NASDAQ:AAPL) and Samsung Electronic (OTCMKTS:SSNLF) have elbowed NOK out of the mobile device market it once had in a stranglehold.
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Nonetheless, NOK stock seems attractive at these levels. It’s true, NOK is no longer the world’s largest mobile phone maker, but its stock doesn’t need that accolade to be a profitable investment.
Where NOK Stands Today
Currently trading at around $6.20 per share, NOK stock is still cheap by most valuation metrics. Shares are is priced at 17 times fiscal 2018 earnings-per-share estimates of 34 cents, which is roughly two points below the S&P 500 index. Combined with its 2.92% annual dividend yield, there are tons of reasons to be patient with NOK.
Plus, assuming The Finish-based tech giant does earn 34 cents in 2018, that would translate to year-over-year growth of 43%. From my vantage point, investors looking for a potential breakout stock should pounce on Nokia, which should trade near $8 when applying a 20 multiple to next year’s earnings, which puts NOK in line with the S&P 500. And I expect the NOK stock to start it’s climb when the company reports second-quarter and first half results next week.
What’s Ahead for NOK Stock?
For the quarter ended June, Wall Street expects Nokia to report revenue of $6.17 billion, though estimates range as high estimate of $6.53 billion and a low estimate of $5.92 billion. Assuming NOK does reach revenue estimates of $6.17 billion, this would mark a year-over-year decline of 3.7%. In terms of EPS, analysts are looking for 5 cents per share, though estimates are as low as 3 cents.
The company has begun to focus on networking (data traffic management in particular) and is on the verge of rebuilding and rebranding its business to capitalize on new growth segments. Although revenue in various segments is on the decline, the rate of decline has drastically slowed, which is an encouraging sign. In the first quarter, NOK reported revenue of $5.7 billion, down 2.5% year over year, yielding 3 cents per share. Plus, there’s a strong chance that the company will top anyalysts’ bottom-line forecasts.
Despite the top-line miss, quarterly adjusted gross margin was 40.8%, compared with 39.7% a year ago. What’s more, Nokia’s operating margin grew 20 basis points to 6.3% on a year-over-year basis. Assuming these trends continue, the company’s EPS trajectory will continue to climb.