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Why Nokia Rallied More Than 14% in July

By James Brumley – Aug 9, 2021 at 5:46PM

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The wireless networking solutions company is slowly but surely working its way back to its once-iconic form.

What happened

Shares of telecom networking technology name Nokia (NOK 1.45%) gained 14.5% last month, according to numbers provided by S&P Global Market Intelligence. The move extends a recovery effort that first materialized in March.

So what

For a short while in February, Nokia shares were caught up in meme-stock mania, driving the stock from a January low of $3.83 to a high of $9.79. Then traders appear to have remembered that, while this American depositary receipt (ADR) is a low-priced, small-float equity, it can't be manipulated like certain other drama-laden stocks. Shares were back to a low of $3.75 by early March as the meme crowd lost interest, but shares have been on the rebound ever since. Monday's close of a little more than $6 per share marks more than a 60% gain in roughly five months.

Business person plotting a rising bar chart on a chalkboard.

Image source: Getty Images.

Largely lost in the noise is that July's leg of the gain -- and the whole five-month rally for that matter -- is completely deserved. The company reported in the middle of last month that it anticipated raising its full-year guidance later in the month, and true to its word, it did just that.

Nokia is now forecasting 2021 revenue of between 21.7 billion euros and 22.7 billion euros versus the previous guidance range of between 20.6 billion euros and 21.8 billion euros. Operating margin rates were previously forecast to come in between 7% and 10% of this year's sales, but in light of the company's results through the first half of the year, that range is now lifted to 10% to 12%.

Now what

It's an intimidating rally to be sure. In fact, interested investors would be wise to wait and let prospective profit-takers do their thing; they may need the nudge of a market-wide pullback to start the process.

Any decent pullback is ultimately a long-term buying opportunity. Relatively new CEO Pekka Lundmark not only inherited a company that was primed for a much-needed turnaround, but he himself appears to have his finger on the pulse of what the networking market needs in the moment. For instance, the company is the first to successfully make a multi-carrier, multi-spectrum 5G wireless connection, setting the stage for all sorts of highly flexible and highly efficient networking options for wireless carriers.

In other words, it's the right company -- even if it's not quite the right time to step into the stock.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Nokia Oyj Stock Quote
Nokia Oyj
NOK
$4.89 (1.45%) $0.07

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