Nokia reported better than expected first-quarter results this Thursday, shares have stabilized above the $4 support level, and the company seems well-positioned for earnings growth in the upcoming period.
Fundamental analysis: Nokia is well-positioned for earnings growth
Nokia Corporation is a Finnish multinational telecommunications, information technology, and consumer electronics company that operates across over 100 countries. Nokia continues to expand its business, and shares of this company show potential for patient investors.
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Nokia reported first-quarter results today; total revenue has increased by 3.5% Y/Y to $6.15 billion while the GAAP EPS was $0.06. Total revenue has increased above expectations (+$436 million), and the board of directors announced that the sales should grow faster than the market in the upcoming years.
“We have delivered a robust start to the year with strong net sales, operating margin, and cash flow. Today’s results demonstrate that we are on track to deliver on our three-phased plan to achieve sustainable, profitable growth and technology leadership as announced at our recent Capital Markets Day,” said Pekka Lundmark, CEO of Nokia.
The reported gross margin in the first quarter of 2021 was 37.9%, compared with 35.3% in the first quarter of 2020. Nokia raised its 2021 guidance and reported that it expects net sales in the range from $25 billion to $26.5 billion.
Nokia also announced a detailed plan to accelerate competitiveness and scale up the lead in the markets, and according to this plan, each business group will focus on capital allocation and technology leadership. The rollout of 5G technology is creating a massive market opportunity for Nokia, and the company continues to invest millions of dollars to gain access to high-quality infrastructure and network equipment in the coming years.
On the other side, Nokia announced a reorganization plan last month to reset the cost basis for its business segments which set this company well-positioned for earnings growth in the upcoming period. Nokia has a high-equity capital structure, its current debt to equity ratio is below 0.5, and the first quarter comparable ROIC was 15.3%, compared to 11.5% in Q1 2020.
Nokia trades at less than eight times 2020 EBITDA, and with the market capitalization of $24.4 billion, shares of this company are reasonably valued.
Technical analysis: Nokia shares have stabilized above the $4 support level
If the price jumps above $4.5 resistance, it would be a signal to trade shares, and the next target could be around $5. Rising above $5 supports the continuation of the bullish trend for Nokia shares, but if the price falls below $4, it would be a strong “sell” signal.
Summary
Nokia reported better than expected first-quarter results this Thursday, revenue has increased above expectations, and the company seems well-positioned for earnings growth in the upcoming period. Shares of this company show potential for patient investors, and if the price jumps above $4.5 resistance, the next target could be around $5.
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