Nokia (NYSE:) touts a year-to-date price increase of 45%, but I remain bullish on the stock. However, its forward P/E remains at 18.3x.  

Nokia, a Finnish company that is involved in the $114 billion wireless network industry, is Nokia. The company currently has more than 100 5G agreements and 160 5G engagement contract.

Its 5G wireless network solutions, and fiber-to-the-home fixed broadband services could boost NOK’s YTD gain to over 50%. (See Nokia stock charts on TipRanks)

Surge in 5G Infrastructure

Government mandates are compelling telecom companies to upgrade their 4G cell sites to 5G. Government licenses are required for both fixed broadband and wireless companies.

In the Philippines, politicians can force companies such as Globe Telecom and PLDT Inc. to increase their 5G network infrastructure. Other countries’ politicians can do the same.

The rising deployment of 5G networks could improve Nokia’s TTM revenue of $26.4 billion. Nokia’s quarterly net income could rise to over $500 million if it signs more 5G contracts.

Nokia’s FTTH business also benefits from $15.3-billion in fibre-to-the home Internet market.

Huawei still on U.S. Blacklist

Nokia’s estimated forward revenue CAGR is only 0.8%. This could significantly improve if Huawei remains forever in President Joe Biden’s list of blacklisted companies. North American and European governments are banning Huawei’s network hardware and replacing it with their own.

Nokia is only required to compete against Juniper Networks NYSE:, Ericsson BS:) (ERIC) and Arista NET (ANET) for 5G contracts in North America, Europe and other U.S.-allied nations.

Nokia will have less competition to secure a larger share of $80.5 billion 5G infrastructure market.

Wall Street’s Take

The consensus among Wall Street analysts is that Nokia is a Moderate Buy, based on seven Buys and three Holds. This implies a 29.7% upside potential.

Conclusion

The relative undervaluation of Nokia makes it an intriguing investment. The company’s expertise in fiber-to the-home broadband and 5G wireless infrastructure is helping it to return to profitability.

Nokia has a large number patents that give it an advantage against Arista and Ericsson.

Disclosure: Motek Moyen didn’t hold any positions in the securities discussed in this article at the time it was published.

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