The Truth about the 5G Rollout, Nokia, and Your Wallet [NOK Stock] By Tre McKee & the Benevolent Investors

In today's video we're going to take a look at how the worldwide 5g rollout could have surprisingly big benefits for Nokia's stock. First, taking a look at the 5g rollout itself, then digging in a bit more to Nokia's results from the past quarter and past years, and how they're kind of perfectly timing their overhaul to take advantage of this rollout. That's happening around the world. I'll finish by sharing my outlook on the share price as well. If you're new here welcome to benevolent investors, my name is trey McKee and my goal with this channel is to get all of us investors to think more about how we can get more from our own investments so that we can give more to those in need, while the 5g rollout across the planet is happening slower than a lot of people were hoping to looks like by February of this year, 30 of the world's countries finally have access to some kind of 5g. Though estimates vary.

It's expected that by some point in 2023, we should be seeing about a third of mobile connections in the U. S. to be running on 5g networks and, while 5g does offer massive benefits, including connection speeds, that put many cabled connections to shame, enabling the onslaught of internet of things and connected cars to actually become ubiquitous. We do see a lot of difficulties happening with the rollout so far. Some of these difficulties include much shorter broadcast ranges requiring often unsightly hardware installations to be set up in, like really obvious places, we're also starting to see the U.

S. unlock c-band frequencies, even though it took longer than you know, many people were hoping to there's still a long way to go before 5g will be commonplace around the world, and I wouldn't be surprised if it takes another eight or ten years, especially outside of metropolitan city areas. Political red tape, defense complications and, like many other considerations, have also been shown to be slowing. The role out of 5g china has the most 5g connected cities, though that doesn't say much as far as network coverage you know like it could be one little neighborhood in a whole city, um, most first world countries are seeing their major cities being covered, or at least connected to 5g as well. Here in Japan, it seems like the rollout's going pretty well in metro areas, and it sounds like in Canada.

A lot of major metropolitan centers are seeing coverage. Growth too. Europe seems to offer a wide variety of connectivity with some areas like largely connected, and other areas like have nothing sounds like the UK is leading the way with perfect momentum happening in Germany too. But I'd be interested to hear your experience with the 5g rollout, where you're at around the world. Let me know down in the comment section so, while the 5g rollout has been proving to be less smooth than hardware providers like apple pushing their super cycle of iPhones with 5g connectivity being one of the most clear sales points of this year would like it's still happening slowly but surely, while we've briefly talked about other 5g, investment plays like sky works solutions and Qualcomm on this channel companies who are looking to offer some of their components into device makers.

Players like Nokia, Huawei and Ericsson are focused on a different part of the market, which would be primarily offering services and hardware to the CSPS or the communication service providers. Like the networks we all use every day to connect to the internet. Don't forget that Nokia is the world leader in submarine networks that connect islands and continents all across the world to the internet. Nokia's, bread and butter, however, is working with those CSPS in their mobile networks division. Here we can see the comparison and net sales between their different segments compared to quarter two of last year, mobile networks, net sales were up three percent on a constant currency basis, while their second-biggest division network infrastructure was up.

Twenty percent third-largest cloud and network services was up, two percent and finally, their highest margin. Business segment. Nokia's technologies was up a healthy 20 sliding down. We see the year-over-year change in operating profit and loss here too, which is exciting to look at mobile networks up 36 with network infrastructure, up 145 cloud and network services down a bit and Nokia technology is up 22 and so from this info we can see that Nokia often still thought of as like a cell phone. You know seller uh, which actually they are in India and other parts of Asia, apparently they're, actually much more heavily focused on building out the networks that power the world and all the you know, cell phone carriers that we use every day, in fact, you're, probably having contact through one of Nokia's products at some point along the line, if you ever use the internet and so with so much ground to cover in the 5g rollout expecting maybe another 8 or 10 years.

This leaves Nokia with a lot of potential for growth in revenues and margins in the coming years too. In fact, the total addressable market across all of Nokia's biggest business segments, is something in the area of 113 billion for reference. Nokia's market cap sits at 34 billion, while competitor Ericsson sits at about 38 billion. Huawei's market cap isn't quite as clear, and I think, with ongoing sanctions, we'll see their international influence, probably like wobbling a little for at least a few quarters. If not longer depends on what happens in politics.

I guess. Last year after Nokia's new CEO pukka landmark stepped in, he announced a swath of changes. He would be making Nokia had become fat and lazy, and he was here to change that. He announced the plan to slim the company down by slashing five to ten thousand jobs or up to twelve percent of the workforce, and he would boost efficiency by unifying various processes through various departments as well, though, he gave a conservative outlook of when these massive changes would actually start to hit. The bottom line we're starting to see a lot of those results hitting much earlier than anyone thought they would.

They changed their second quarter guidance a few weeks back, causing the stock price to jump up nicely, and then, in the recent second quarter, earnings report. They announced a similar boost in expectations for the entire year of 2021. This has brought a nice lift to the stock price, which seems to be the gift that keeps on giving a few cents a day. Over the last couple of weeks, the stock price has finally come into a range that I think's you know more on par with what I think they should be valued with at the moment at least, but I'll get into some of the more specifics of that in a second. So while the 5g rollout is happening more slowly than many people want it to, it seems like Nokia has just started to shape up on time to capitalize on this net sales from CSPS was up 8 on a constant currency basis, year over year to 4.2 billion euros, leading us to a total net sales boost of nine percent across all their business segments. This helped Nokia end the quarter with an EPS of six euro cents, uh versus last year's.

Second quarter of two return on invested capital was up big time from 11.4 to 18.4, and we ended the quarter with free cash flow, 77 million euros positive for the fifth quarter in a row, but still not you know, dropping any jaws, landmark and CFO. Wiring have been clear in expressing that this number should continue to be positive into the coming quarters, and once it's positive enough, I think we'll start to see a dividend coming back too and though many investors prefer to forego dividends so that that money can be plowed back into the company to encourage growth. I've seen that in a lot of cases, solid companies offering solid dividends can often bring in a whole new core cohort of investors, which may further boost margins for Nokia. This chart nicely illustrates how Nokia's changes are starting to hit the operating margins with the outline box in the middle there coming from the structural improvements being applied, they're using a lot of these savings to put back into r d, which is really what long-term investors in Nokia want to see, looks like r d spending was up 44 million euros compared to a year ago and while that's relatively small, especially compared to competitors like Huawei, I think this demonstrates Nokia's understanding that their technology advantages are crucial, but maintaining a conservative spending policy is just as important the Nokia technologies portion of the business, which generates big margins on their 3 500 patent families, will continue to be crucial to the company's growth, and hopefully, this r d bump will continue to see growth in the coming years. Spurring that, broadly speaking, comparing the eV acid ratios with Nokia and Ericsson Nokia is at about 8.18, while Erikson's at 8.64. So the gap is closing in terms of the value that I saw in the Nokia stock even up to a few weeks ago.

I think, though, Erickson has had to deal with a bout of patent issues and lawsuits. They've also, arguably seen a bit more success in Asia, particularly in China, as of late, so keep that in your mind, if you're, a Nokia investor, while Nokia's been growing across the world, they did lose market share in Asia outside of China. This chart shows how each region contributes to Nokia's growth worldwide, while we're seeing losses in Asia, not including china, India, Latin America and Europe's regional growth totally dwarfed the losses in Asia, though we're seeing more headlines for Erickson taking ground in China, it's good to note that Nokia did still grow 11 in greater china. So what do we do next with Nokia stock? In my own number crunching, I feel like I'd be content if the price were to hit high sixes or sevens kind of in the coming months, and once again, if landmark's able to pull through on his thesis of making Nokia number one in the world which he seems to be capable of doing, we could see the price hitting double digits in the coming quarters or years. I'm going to be holding on to my Nokia stocks, which currently make up about seven percent of my portfolio between shares and options, if you're also going to be holding on to Nokia or want to do a little more research check out 12 things you should know about Nokia in 2021 by clicking here, love you guys and stay generous.

Source : Tre McKee & the Benevolent Investors