Nokia stock (NYSE: NOK) has outperformed since the start of 2024, rising by approximately 52% (Feb. 20) since January 2024, while the broader S&P 500 has gained around 28% during the same period. Similarly, Nokia’s peer Ericsson stock (NASDAQ: ERIC) has increased by 33% over the same timeframe. What is driving this trend?
Nokia posted a strong Q4 earnings beat, reporting Q4 EPS of €0.18, which exceeded analyst forecasts of €0.14. This compares to earnings of €0.10 per share in the same quarter last year. Although revenue slightly missed expectations at €5.98 billion (around $6.5 billion) versus €6.00 billion, it still grew 10% year-over-year in Q4. However, full-year revenues declined by 9% year-over-year to €19.2 billion because of segment-specific challenges. The core mobile networks unit faced a 21% year-over-year sales drop in 2024, mainly driven by reduced activities in India and North America. Revenues from network infrastructure and cloud network services each fell by 6% year-over-year, owing to weak demand for internet protocol—particularly in the Americas and EMEA regions. Meanwhile, Nokia Technologies emerged as the top-performing segment with a remarkable 78% increase in net sales, largely fueled by new licensing agreements that support the company’s strategy to leverage its intellectual property. Despite these revenue headwinds, full-year profitability increased by 40% in FY 2024, as proactive cost management and improved gross margins helped offset the slower sales recovery. Additionally, if you prefer a smoother ride than investing in an individual stock, consider the High Quality portfolio, which has not only outperformed the S&P 500 but also delivered over 91% returns since inception.
Nokia’s sales mix has shifted in recent quarters due to regional differences. In particular, U.S. sales have declined as customers work through their existing 5G equipment inventory. Looking ahead, Nokia has issued guidance for FY 2025, forecasting operating profits between €1.9 billion and €2.4 billion ($2.1 billion to $2.5 billion). The company also expects its full-year free cash flow to account for 50% to 80% of operating profit. For 2026, Nokia anticipates operating margins exceeding 13% and free cash flow representing 55% to 85% of operating profit.
The performance of NOK stock over the past four years has been inconsistent, with annual returns exhibiting much greater volatility than the S&P 500. The stock delivered returns of 59% in 2021, -24% in 2022, -24% in 2023, and 34% in 2024. In contrast, the Trefis High Quality Portfolio, which comprises 30 stocks, is significantly less volatile and has comfortably outperformed the S&P 500 over the last four years. Why is that? As a group, the stocks in the HQ Portfolio have delivered superior returns with lower risk compared to the benchmark index—a much smoother ride, as evidenced by the HQ Portfolio performance metrics.
Is Nokia stock worth considering at its current price of about $4.99 per share (Feb 20)? Although growth may remain elusive this year and historical risk-adjusted returns have been weak, there are still several reasons to consider Nokia stock. Its valuation appears reasonable, with the stock trading at around 15x consensus 2025 earnings—compared to Ericsson’s roughly 17x forward earnings. Furthermore, Nokia may be better positioned to weather a potential slowdown in wireless infrastructure spending, given its presence in the fixed-line space. We estimate Nokia stock to be worth $5.01 per share, which aligns with the current market price. For further details on our valuation, see our analysis on Nokia Valuation: Expensive or Cheap.
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