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Familiarity breeds contempt, even in the world of stock trading, and that could be what's happened to Nokia. It's been around for years as maker of the abiding stick mobile phone - for so long, in fact, that people might have stopped noticing it was there.
Recently, it's received a lot of attention as a meme 5G stock pushed by Reddit traders with a grudge against hedge fund owners. But behind the hype and the social media action, Nokia has been persistently reinventing itself as one of the leading innovators of 5G technology, leading up to its explosion in 2021 as potentially one of today's best 5G stocks.
5G is Nothing Less Than the Next Industrial Revolution
5G, or the fifth generation wireless standard, is more than just the next wave of wireless connectivity and is set to power more than just faster mobile gaming. To tech and industry thought leaders, 5G is nothing less than the vehicle of the fourth industrial revolution.
In the words of Wilson Chow, Global Technology, Media and TelecommunicationsLeader Partner at PwC China, "5G opens up possibilities far beyond the reach of 4G or Wi-Fi 6. [..] Besides offering up to 100 times the speed and 1,000 times the capacity of today’s mobile networks, 5G will provide ultra-reliability, low latency, reduced energy use and massive connectivity both inside and outside of buildings."
PWC estimates that the US will see a total economic uplift of at least $1.3 trillion from 5G, but it's impossible to put a price on the social, industrial, and economic transformation that we'll all experience as a result.
Together with the mushrooming use of Internet of Things (IoT) embedded devices and sensors, 5G's latency-free connectivity is driving widespread adoption of and continually opening up more use cases for cutting-edge applications like artificial intelligence (AI); robotic process automation (RPA); virtual reality (VR) and augmented reality (AR); remote operations; and more.
Nokia is Leading the Charge
What traders accustomed to dismissing any stock pushed on Reddit should know, is that 5G has also proved a vehicle of transformation for Nokia. Nokia shed its mobile phone division back in 2014, selling the entire affair to Microsoft Mobile. Free of the distractions of manufacturing mobile phones, Nokia was able to realign its focus as a 5G stock towards 5G network solutions.
In its Q1 2021 interim report, Nokia announced $6.1 billion in 5G-connected revenues; its gross margin was up 38.2%; sales of network infrastructure grew 28% to $1.7 billion, and its year-on-year revenues rose 103% by July 1st 2021. The company teasingly delayed announcing its Q2 results until July 29th, but informed investors that it will be revising upwards its Q1 guidance based on Q2's phenomenal performance. The Q1 earnings report already projected that net sales would jump to between €20.6 billion and €21.8 billion ($24.32 billion and $25.74 billion), and that it would see an operating margin of 7%-10%.
5G has been Nokia's passport to success, but that didn't come out of nowhere. If anything, it's surprising that the market has reacted with such surprise to Nokia's success. The company has been steadily clawing its way up to compete with market leaders, largely linked to its 5G focus. Over the last 2 years, Nokia expanded its 5G engineer workforce to over 18,000 R&D engineers, a rise of 40%, and has been raising investment in 5G R&D, cutting costs by $717 million over the next 2 years to redirect the funds into innovation without affecting profitability.
Nokia’s 5G Transformation
Since January 2019, Nokia won 20 new radio deals and increased its share in a similar number of shared accounts. By mid-2020 it had acquired a total of 79 commercial 5G contracts around the world, including 29 live 5G networks, and is running advanced testing programs on 5G radio access products with international mobile carriers such as Verizon, China Mobile, SK Telecom, and Deutsche Telekom AG. It recently secured a five-year 5G contract with T-Mobile, and is AT&T's C-band gear supplier.
The final rung in Nokia's ladder to 5G market competitiveness was its June release of the new AirScale Gear, a 5G radio access network (RAN) product that Tommi Uitto, president of mobile networks at Nokia, says brings its features up to speed or ahead of the competition. It's the result of over 2 years of sustained investment and research that never lost sight of the value of 5G.
AirScale Gear includes a baseband, radio, and massive MIMO antennas, with the latter tipped as key 5G tech for mid-band connectivity. "What is fantastic about the new product platform is that it will put us in the lead in the weight of what is the highest-volume massive MIMO configuration across most of the markets in the world," he said, proudly noting “the catch-up phase is now over.”
Nokia isn't resting on its oars, now it's come this far. It's steaming ahead on providing cloud as a service, aiming to win the major cloud and big data support race too. Thanks to these enormous advances in 5G sales and innovation, Nokia has achieved returns of 37.34% to date, compared with 19.26% on average for Computer and Technology stocks. Nokia is perceived as having drawn level with the three 5G giants Ericsson, Huawei, and Samsung, and is even edging ahead, suggesting it might be considered among one of the best 5G stocks to buy today.
5G Investment Potential
Nokia owes the majority of its comeback to a savvy decision to shift from mobile phone production to 5G deployment, with plenty of hard work and R&D investment focused on the 5G goal.
It seems that investors just got used to ignoring Nokia, until shocked into the realization that the ugly duckling of mobile phones has turned into a 5G swan. Nokia isn’t a tired and expired phone anymore; it’s a major player in one of the most notable transformational movements in our lifetime.
And one way to achieve exposure to Nokia and 5G’s growth potential, without putting all your eggs in one basket, is via a 5G Exchange Traded Fund (ETF). Defiance’s FIVG can be traded like a stock, but its value is determined by the index of a bundle of stocks it tracks, including Nokia. It provides crucial exposure to the future and innovation embedded in 5G companies, while aiming to mitigate the risk of investing in any single company.
FIVG offers investors a bite of the 5G future.
As of 08/12/2021 Nokia represents 2.62% of FIVG’s holdings. Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security.
The Funds' investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contain this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 833.333.9383.
Investing involves risk. Principal loss is possible. As an ETF, the funds may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Funds are not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. The value of stocks of information technology companies are particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation and competition. The Funds are considered to be non-diversified, so they may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. This risk is magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.
The possible applications of 5G technologies are only in the exploration stages, and the possibility of returns is uncertain and may not be realized in the near future.
The “BlueStar 5G Communications Index™”, “BFIVG™ Index” (collectively “5G Communications Index"), is the exclusive property and a trademark of BlueStar Global Investors LLC d/b/a BlueStar Indexes® and has been licensed for use for certain purposes by Defiance ETFs LLC. Products based on the Global 5G Communications Index* are not sponsored, endorsed, sold or promoted by BlueStar Global Investors, LLC or BlueStar Indexes®, and BlueStar Global Investors, LLC and BlueStar Indexes® makes no representation regarding the advisability of trading in such product(s).It is not possible to invest directly in an index.
The Defiance Next Gen Connectivity ETF is the first ETF to emphasize securities whose products and services are predominantly tied to the development of 5G networking and communication technologies. The fund does this by tracking The BlueStar 5G Communications Index. The Fund attempts to invest all, or substantially all, of its assets in the component securities that make up the Index.
Diversification does not ensure a profit nor protect against loss in a declining market.
Commissions may be charged on trades.
FIVG is distributed by Foreside Fund Services, LLC.
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