Nokia's Stock Surge: Is the Telecom Giant Still a Buy After Multi-Year Rally?
HELSINKI — Nokia Oyj (HLSE: NOKIA), the Finnish telecommunications equipment maker once synonymous with mobile phones, has staged a remarkable comeback on the stock market in recent years. With shares gaining nearly 88% over the past five years and currently trading around €5.76, the company is back in the spotlight. But for investors eyeing the stock today, the critical question is whether this performance is sustainable or if the optimism is already baked into the price.
The backdrop is a global race for 5G and network infrastructure, where Nokia remains a key player alongside rivals like Ericsson and Huawei. The company's strategic pivot to focus on networking equipment and licensing appears to be paying off, but market valuations are now under scrutiny.
Using a Discounted Cash Flow (DCF) model—a common valuation method that projects future cash flows—analysis suggests Nokia's intrinsic value is approximately €6.14 per share. This implies the current market price represents only a modest 6.2% discount, hardly a deep-value signal. "The DCF model indicates the stock is roughly fairly valued," the report concludes, noting that small gaps can close quickly with market volatility.
However, another classic metric paints a different picture. Nokia's Price-to-Earnings (P/E) ratio stands at 51.23x, significantly above the communications industry average of 34.92x and a peer average of 29.45x. Compared to a proprietary "Fair Ratio" of 33.38x—which accounts for growth, margins, and risk—the stock screens as expensive on this measure. "On a P/E basis, the shares look overvalued," the analysis states, highlighting the tension between different valuation approaches.
This mixed valuation outlook underscores the challenge for investors. Is Nokia's premium P/E justified by its positioning in next-generation networks, or is the stock due for a correction? The answer may depend on one's narrative for the company's future—whether one bets on sustained demand for telecom infrastructure or anticipates heightened competition and margin pressure.
Investor Voices: A Range of Perspectives
Lars Bergström, Portfolio Manager (Helsinki): "The P/E comparison is too simplistic. Nokia is in a transition phase, investing heavily in R&D for 6G and Open RAN. The market is pricing in future profitability, not just current earnings. The strategic contracts they're winning justify a premium."
Chiara Rossi, Independent Tech Analyst (Milan): "The DCF showing fair value is the more reliable signal here. It's based on cash flows, not market sentiment. A 6% margin of safety isn't compelling, but it's not a sell signal either. I'd hold and watch execution on their order backlog."
David Chen, Retail Investor (Forum Handle: "ValueHawk"): "This is classic market myopia. Everyone's chasing the 'infrastructure play' story. A P/E over 50 for a company in a brutally competitive, capital-intensive industry is insane. The moment growth slows, this multiple will collapse. It's priced for perfection that doesn't exist."
Anika Patel, Telecoms Sector Fund Manager (London): "You have to look at the sum of the parts. Their patent portfolio alone is a cash cow. The valuation isn't just about hardware sales. The market is slowly recognizing the embedded value in their IP and their software-defined networking solutions."
Disclaimer: This analysis is based on historical data and analyst projections. It is not financial advice. Investors should conduct their own research or consult a financial advisor.