Nokia (NYSE:NOK) finally impressed investors. After the stock traded in the $4.00 range for many months, the company posted impressive 5G growth in its Q1. Margins also rose. Will this trend last?
Nokia posted sales from its network infrastructure business rising by 28% to $1.7 billion. The gross margin rose to 38.2%, up from 36% last year, thanks to 5G. CEO Pekka Lundmark said that Nokia is in the position to post an operating margin of 7% – 10%.
Looking ahead, Nokia expects earnings seasonality to be less pronounced. The steady results ahead are a welcome change. In the last two years, the turnaround firm failed to deliver. Investors guessed on when and by how big the business will improve.
Huawei’s continued loss in market share in the network space will benefit both Nokia and Ericsson. While ERIC stock is more attractive because of the consistent strength, Nokia is still a bit of a gamble. It will need to report another consecutive quarter of strong margins growth. Scaling the business, accelerating through technology leadership (such as the open platform), and contract wins are keys to its success.
Investors who bought NOK stock in the $4.00 range may lock in profits. The stock may fade on profit-taking. Still, the company is fundamentally more compelling than before the report.