Is Nokia Stock Undervalued and What’s the Best Price to Buy It?

Nokia (NOK) stock has gained 10 percent in the past week and 17 percent in the past month. So far, the stock has gained 40 percent YTD. The shares still trade more than 40 percent below their February peak attained at the height of the GameStop short squeeze. Should you buy Nokia stock now?

The latest short squeeze with AMC Theatres (AMC) stock appears to have left Nokia behind. The stock didn't change much from a year ago. Some investors wonder if Nokia is undervalued.

WallStreetBets is the Reddit community that the world has come to know well for its role in the GameStop squeeze that cost hedge funds billions of dollars. Many stocks have moved sharply after favorable mentions in the community. Nokia stock has been among the popular discussions on WallStreetBets lately.

The community has noticed that NOK stock hasn’t taken off like other meme stocks in the latest rally. AMC stock has gained more than 160 percent in the past week and 2,300 percent YTD. Naked Brands (NAKD) has soared 45 percent in the past week and 330 percent YTD. GameStop is up 1,200 percent YTD.

Some WallStreetBets investors think that Nokia could be an opportunity for those who missed on other meme stocks. A major advantage the community sees in Nokia is that it has stronger fundamentals than most other meme stocks. However, since Nokia isn’t heavily shorted, an AMC-type pop doesn't look likely.

Nokia shares rose slightly on June 3 and closed at $5.48 after trading between a low of $5.41 and a high of $5.68. At the closing, Nokia’s market value was $31 billion. Nokia has 5.6 billion shares outstanding.

Nokia sells telecom equipment and the services that go with the equipment. It’s jostling for a position as a top vendor of 5G network gear. Nokia has been around for more than 100 years, and its innovations have resulted in a large portfolio of patents. The company licenses its patents to companies in a range of industries and collects royalty payments.

However, Nokia stock hasn’t moved much despite a recent stream of positive news touching on its equipment and patent businesses. The company has secured 5G deals with all of the major wireless operators in the U.S. and has contracts with many operators in Europe and Asia. For example, it recently bagged a 5G deal with the Philippines’ Dito Telecommunity.

On the patent side, Mercedes-Benz brand owner Daimler will pay Nokia for rights to use its technology in cars. Nokia took Daimler to court to get it to pay for the patents. Many Reddit investors think the lagging NOK stock price shows that Nokia hasn’t got the attention it deserves.

On June 3, Liberum Capital upgraded Nokia stock to a buy rating from a hold and raised the target price to 5.5 euros ($6.66) from 3.30 euros ($4.0). The new target price implies more than a 20 percent upside potential. Nokia carries a consensus target price of $5.78, which implies a 5.5 percent upside potential to the current price.

Investors hoping for an AMC-type spike in NOK stock might be disappointed because the stock isn’t heavily shorted. Even with substantial short interest, Nokia’s more than 5 billion shares outstanding would frustrate a short squeeze bid.

An investment decision in Nokia should rest on fundamentals instead of technical trends. Nokia is positioning itself to be the leader in 5G gear supply. Huawei has been locked out of many Western markets and Ericsson faces an uncertain future in China’s 5G market after Sweden banned Huawei equipment. Between Huawei’s political woes and Ericsson’s China ban risk, Nokia appears to have plenty of opportunities to grow its 5G market share.

Nokia stock has traded in the $3.21–$9.79 range over the past year. The spike to nearly $10 came in February during the initial meme stock squeeze and it lasted only briefly. Nokia has a track record of rising slowly. The stock usually corrects swiftly whenever technical traders appear to be driving it too fast. With that in mind, Nokia stock looks to be a good buy in the $5 price range.