Nokia Shares Are A Buy, Just Not Right Now

Things are looking hairy for a 2017 Nokia Oyj (ADR) NOK, but just give it a few years.

“We continue to believe that 5G will be a major boon for Nokia, given its global reach, advanced RAN technology, and long-developed scale efficiencies,” Argus analyst Jim Kelleher wrote in a Monday note.

Kelleher holds out hope for the long term, eyeing a 2020 5G deployment schedule, but he justified a downgrade to Hold on near-term risks.

Nokia’s Limits

The firm’s entrenchment in the challenging carrier network infrastructure market and wireless specialty is seen as a potential hindrance.

“Money is being spent on tech infrastructure, but unfortunately not in areas where the company is strong,” Kelleher wrote (see his track record here). “Nokia’s enterprise presence is limited, and that means its participation is also limited in the defining transitions of today, including cloud, hyperconvergence and next-generation data center.”

The firm is poised to profit from 5G deployment, but timelines suggest delayed impact. In the meantime, it’s reliant on 4G and 3G opportunities.

“This business has gone into sleep mode in most markets, given that 4G is largely built out in mature economies and 3G is built out in growth and even frontier markets,” Kelleher wrote.

Partial Obsolescence

Demand for related upgrades and expansions has diminished as software updates obviate hardware improvements. At the same time, carrier consolidation and network sharing have slashed Nokia’s potential client base.

Nokia has responded to challenges in the field by economizing operations and expanding its wireline capacities with asset purchases from Alcatel Lucent SA (ADR) ALU and Siemens, but it hasn’t truly expanded exposure beyond wireless.

At the time of publication, Nokia was trading down 1.73 percent at $4.82.

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