Nokia Stock Is Not Cheap Enough

Nokia (NYSE:NOK) stock got off to an encouraging start this year, with the price going from $3.80 to $4.47. But the gains have since faded. Note that the year-to-date return for NOK stock is about 6%. And yes, when you look back at the past 12 months, it is -33%.Source: RistoH / Shutterstock.com For NOK stock, the fortunes are tied to the 5G opportunity. The technology offers much greater speed and performance, which should lead to more innovative applications. No doubt, companies like Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) are investing heavily in 5G to boost their competitiveness.Now for NOK stock, there have been some positive developments. For example, the regulatory approval for the merger of T-Mobile's (NASDAQ:TMUS) and Sprint (NYSE:S) should be a boost. Keep in mind that - in the summer of 2018 - NOK and TMUS entered a strategic partnership for 5G. So, with Sprint, there will be access to critical wireless radio licenses. This should help expand the 5G opportunity for NOK.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIn the meantime, the company has been making progress with snagging customer contracts. As of the end of the latest quarter, NOK had 66 commercial 5G engagements and 19 have been finished. * 7 Safe Stocks to Buy on the Coronavirus Dip While all this is certainly good, there are some headwinds, though. The fact is that overall growth for 5G has been sluggish. Part of this is that the carriers are taking a wait-and-see approach with the initial rollouts. But at the same time, there is lots of uncertainty regarding how things will ultimately play out with the U.S.'s battle against Huawei, which is China's mega telecom equipment developer. The U.S. believes that the company is essentially a spy for the government and poses serious national security risks.Regardless, there are many customers that are far from clear on how to proceed. And yes, this has muted demand.But there are other nagging issues for NOK stock. Note that the competitive environment remains intense. For the most part, Ericsson (NASDAQ:ERIC) has proven to be a formidable rival. There has also been more price cutting and discounting to snag deals.For NOK, it also does not help that the company blundered with its technology choices. Initially the company focused on using field-programmable gate arrays (FPGAs) but this was too expensive. As a result, NOK has been transitioning to system-on-a-chip (SoC) integrated circuits. But this will take time to make a difference.And finally, there is the impact of the coronavirus from China. For NOK, the company is vulnerable to supply chain disruptions. What's more, the slowing of the global economy will likely mean delays in purchasing decisions for 5G equipment. Bottom Line on NOK StockRecently the U.S. Attorney General, William Barr, gave a speech where he expressed the idea of taking a controlling interest in NOK or ERIC (or both). Yes, if this winds up happening, it would be a nice driver for the stock price.But wagering on this is very risky. A deal for NOK may face political blowback in the U.S. as well as Finland. The U.S. also has little experience with state-sponsored ownership with private entities.Actually, regarding NOK stock, perhaps the biggest attraction is the valuation. Consider that the company's forward price-earnings ratio is about 11.5 times. The sentiment is also fairly negative.But based on the company's own guidance, the top-line growth is expected to be essentially zero for this year. Interestingly enough, this could be too optimistic because of the slowing global economy and tough competitive environment. Thus, there may be few catalysts to get NOK stock back on track.Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Safe Stocks to Buy on the Coronavirus Dip * 7 Stocks to Buy Down 10% in the Last Week * These 4 Stocks to Sell Are Melting Down Now The post Nokia Stock Is Not Cheap Enough appeared first on InvestorPlace.

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