Nokia makes progress in 5G race, proves it’s more than just a meme stock
Nokia – known more as a meme stock than as an attractive investment these days – is making waves for all the right reasons after breaking into the Chinese 5G market.
5G: The Usain Bolt of download speed
5G has one big selling point: speed. A video that takes 6 minutes to download on 4G takes only 15 seconds on 5G.
But the global rollout of 5G has been anything but fast. Businesses were slow to adopt 5G networks since their mid-2019 debut thanks to…
- Limited infrastructure: 5G requires new infrastructure of cell networks – which isn’t expected to be installed until 2022.
- Profitability questions: There are large upfront costs to 5G, while it’s uncertain if consumers will pay extra for 5G’s perks.
- Lacking a catalyst: 3G had mobile internet and 4G had streaming video, but 5G is missing the application to take it mainstream.
The 5G market, which is expected to balloon to nearly $700b by 2025, has three main competitors – Huawei, Ericsson, and Nokia. And with the U.S. restricting Huawei and Ericsson at odds with China, this might be Nokia’s time to shine.
Nokia refuses to phone it in
Once the global leader of the mobile phone market, Nokia has since pivoted to providing telecommunications networks like 5G.
After fumbling behind Huawei and Ericsson (NASDAQ:ERIC) in the 5G race, Nokia replaced its CEO with Pekka Lundmark, who brought a new “invest whatever it takes to win 5G” mentality. Since then, the company is on the comeback:
- Last week, Nokia announced it expects to raise its 2021 financial outlook upwards.
- Yesterday, it won its first 5G contract in China – while Ericsson lost market share.
The news, alongside Nokia’s announcement on improving profit margins could lead to gains in its stock price – and this time, not because it’s just another meme stock.
Investors: Getting out of the meme zone
Nokia’s 5G contract with China is a huge win for a couple of reasons:
- Infrastructure: China has at least 690k 5G stations, compared to 50k in the U.S.
- Ease of adoption: China has a far larger selection of 5G capable phones available, and at lower prices.
The company is expected to elaborate further on the contract on July 29th, its expected earnings announcement date.
Nokia’s recent moves are proving to investors that it is more than just a meme stock. After surging 56% in its meme days and falling 30% two days later, its stock is gradually gaining momentum. Nokia will have to prove to more than Redditors that its stock price is as resilient as its phones once were.