Is It Time to Go Bottom-Fishing With Nokia?
- By Naman Shukla
I have always liked bottom-fishing for stocks. My last buy call on Qualcomm (QCOM), which was trading close to its 52-week levels back then, has returned over 10% in just a few weeks. This is another one of my bottom-fishing ideas.
Nokia (NOK) is trading just a little over its 52-week lows, and the company is facing tailwinds that can drive the stock higher in the coming months.
Warning! GuruFocus has detected 3 Warning Signs with NOK. Click here to check it out.
The intrinsic value of NOK
A deal with HMD Global
Nokia decided to return to the smartphone segment, and the company recently signed a deal with Finland-based HMD Global. According to the deal, HMD Global has been issued an exclusive worldwide license to manufacture Nokia-branded smartphones and tablets for the next decade. It is likely that HMD Global will pay Nokia in the range of $3 to $15 per device sold for using its brand and intellectual property from its industry foremost patent portfolio.
On the other hand, Microsoft (MSFT) has decided to sell what leftovers of its feature phone unit to FIH Mobile, a subsidiary of Foxconn, for around $350 million. As a result, Foxconn attains Microsoftas manufacturing, several design rights, and its widespread distribution and sales networks. Moreover, Foxconn is also involved in the Nokia-HMD Global deal.
Foxconn is strategizing to create a Nokia branded Android smartphone comprising Appleas iPhone exciting design. However, this is an amazing idea and carries lot of growth potential for Nokia.
In combination with the Microsoft sale, Nokia and HMD have made an agreement with Foxconn to work together on the block of a worldwide business exploiting properties from its $350 million acquisition.
Why acquiring Withings matter
Nokiaas return as a smartphone vendor is still tentative. Therefore, the company recently detailed its plan to acquire French wearables manufacturer Withings for $193 million. As per a research report from Statistaas, the wireless health and mobile-based gadgets markets are significant and lucrative.
Withings has an inclusive portfolio of health-monitoring gadgets, as it comprises smartwatches and fitness wristbands that are compatible with Android as well as iOS devices. It also has wireless weighing scales, remote baby monitors, blood pressure monitors and last but not least camera/air quality monitors.
Two years ago, Nokia began developing Wellcare, but the purchase of Withings will hasten its extension into the digital health market. The unit should also fortify Nokia Technologies, which was formed to patent and license technologies after the sale of its device two years before.
Conclusion
Given the valuation, now is the ideal time to go bottom-fishing for Nokia. With the stock still trading near its 52-week lows, investors can witness significant gains as the aforementioned tailwinds materialize.
Start a free seven-day trial of Premium Membership to GuruFocus.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 3 Warning Signs with NOK. Click here to check it out.
The intrinsic value of NOK
