Every once in a while, a stock I’ve long since relegated to the dustbin of history will surprise me. Nokia’s (NOK) bullish price surprise on Monday did just that. 

I can’t remember when I last wrote about the Finnish telecom equipment giant. It has to be more than five years. NOK hasn’t traded above $10 since March 2011. In the years since then, it has traded as low as $1.63 in July 2012 and as high as $9.79 in January 2021. It hasn’t gotten anywhere close to its November 2007 20-year high of $42.22. 

When I saw that Nokia’s shares gained nearly 5% yesterday, with over 71 million shares traded, I just had to figure out what was going on with this long-forgotten stock.

Not surprisingly, AI has much to do with the 18-month run it’s been on. However, I’ve heard the argument “this time it’s different” plenty of times in the past decade. 

Nokia’s biggest claim to fame remains its failure to hang on to its dominant position in the cell phone market. In the early 2000s, it held approximately 50% of the global mobile phone market and was Europe’s most valuable company. That’s a big fall from grace. 

So, now that it’s back on my radar, I’m left to ponder whether its run to $8.82 yesterday is another move on its way to double digits and beyond, or a colossal head fake that will see it retreat as we wind our way through 2026. 

Either way, Nokia’s bullish price surprise has indeed surprised me.

A Stretched Valuation 

As I always do when evaluating a stock that’s gone on a big run, I like to consider its valuation metrics at the top of its game. In Nokia’s case, that would be 2007. 

That year, according to S&P Global Market Intelligence, Nokia generated €51.06 billion ($58.80 billion) in revenue and €9.0 billion ($10.36 billion) in operating income. In 2025, its revenue was €19.89 billion ($22.9 billion), with operating income of €1.54 billion ($1.77 billion). The operating margin in 2007 was 17.6%, more than double today's. 

At the end of 2007, Nokia’s enterprise value was 2.03 times sales; today, it’s 2.01x. The S&P 500’s P/S ratio at the end of 2007 was 1.43; today, it’s 3.30, so you could argue that, based on the index’s multiple expansion over the past 18 years, Nokia’s P/S multiple should be higher. 

Of course, that neglects two things: First, that the index’s valuation is stretched beyond belief, and secondly, that Nokia’s not nearly as good a business as it was in 2007. 

Free cash flow is something I like to focus on because it gives you an idea of a company's financial strength.     

At the end of 2007, Nokia had a free cash flow of €7.17 billion ($8.26 billion). Based on $58.80 billion in revenue, its free cash flow margin was 14.0%. Today, based on a free cash flow of €1.47 billion ($1.69 billion) and $22.9 billion in revenue, it’s 7.4%, about half. 

Nokia’s enterprise value at the end of 2007 was €95.5 billion ($109.98 billion). So, its free cash flow yield was 7.5%. Anything 8% or above is undervalued in my opinion. Its free cash flow yield today, based on an enterprise value of €40.02 billion ($46.09 billion), is 3.7%. Anything below 4% is overvalued. 

So, you could argue that these free cash flow yields suggest that Nokia stock was fairly valued both then and now. Conversely, you could say that today’s valuation has a considerable amount of conjecture baked into the price of its stock, whereas back then, you had a telecom stock that still was at the top of its game. 

One deserving of a stretched valuation, and one not so much.

What’s All This About AI?

In mid-January, Morgan Stanley analyst Terence Tui upgraded Nokia's stock from Equal Weight to Overweight, while raising the target price to €6.50 ($7.49) from €4.20 ($4.84). On March 13, the analyst raised the target once more to €8.50 ($9.79). More importantly, Nokia is on the investment bank’s Top Picks list for 2026. 

Tui believes that the restructuring done in recent years has put it in a position for future growth. Its growth accelerated following Nokia’s $2.3 billion acquisition of Infinera in February 2025.  

“The combination will increase the scale of Nokia’s Optical Networks business by 75%, enabling it to accelerate its product roadmap timeline and breadth; providing better products for customers and creating a business that can sustainably challenge the competition,” Nokia said in its June 2024 statement announcing the acquisition. 

With the acquisition of Infinera, it is going after AI, data center, and cloud computing business. In recent months, it has secured AI-focused partnerships with Telefonica (TELFY), TIM Brazil, and Deutsche Telekom (DTEGY). 

As a result, its AI and cloud business, which currently accounts for 6% of revenue, should grow considerably in the years ahead. Of course, it doesn’t hurt that Nvidia (NVDA) owns nearly 3% of its stock. 

While it’s a long way from the double-digit returns on assets and capital that it routinely generated before 2009, if it can just double them from where they are now--2.5% ROA and 3.8% ROC--the current valuation wouldn’t appear nearly as frothy.  

The Bottom Line on Nokia Stock

I’m glad to see Nokia’s on the mend. It was one of Finland’s great success stories in the early part of the 21st century, and can be once more with a little traction from its optical networking business’s push into AI and data centers. 

Analysts remain lukewarm about the stock. Of the 18 covering it, 10 rate it a Buy (3.67 out of 5), with a $7.69 target price, below its current share price.     

If you’re an aggressive investor, a small bet on Nokia at current prices wouldn’t be a lost cause. That said, Nokia has decent options volume, so you might want to use them to reduce the risk. 

Good luck. 

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