After Nokia (NYSE:NOK) stock fell to a low of $2.34, shares trended higher in the last month. Investors have the 5G refresh and takeover rumors as two positive catalysts potentially lifting the stock to new yearly highs.
Nokia denied reports that it hired an investment bank to fight a hostile takeover. The rumors signal how undervalued NOK stock is.
Nokia trades at a market capitalization of around $20 billion. This is 9 times smaller than Cisco Systems (NASDAQ:CSCO) and is smaller than its rival, Ericsson (NASDAQ:ERIC).
A bid for Nokia would end the discount between the market price and the business value. Still, in the last decade, the company failed to re-ignite growth. 5G deals in China lagged, while competition grew in North America and Europe. High turnover also held back the company from growth.
As investors look to add 5G infrastructure suppliers to their portfolio, Nokia is a good speculative trade. Though under-performing management is hurting the company’s performance, rumors of a takeover may lead to a much-needed shakeout at the executive level.
Your Takeaway
A Nokia buyout would unlock the discount in the stock but may also face plenty of governmental resistance. Still, bids on the company will send the stock sharply higher.
Disclosure: the author owns Nokia stock.