Relative Strength In Nokia Suggests More Upside In 2016

By Unknown Sunday, January 10, 2016
Shares of Nokia have had a great start in 2016 compared to the overall market. While the S&P 500 dropped 5.86% in 2016, Nokia is up 4.42%, representing significant relative strength.

2016 will be an important transition year for Nokia, as the company begins to integrate Alcatel Lucent and is expected to realize significant synergies that will lead to over $1B in savings over time. The company is also in the midst of completing a lengthy patent arbitration with Samsung, which will help dictate future royalty payments from Apple and other companies. An arbitration with Apple is expected in late 2016/2017. A recent favorable patent royalty ruling for Qualcomm signals that Nokia is negotiating new royalty prices with device manufacturers at the right time.

5G will also be a focus for Nokia, but that is longer term and won't be meaningful to Nokia's top or bottom line for years to come. A potential return to smartphones and tablets in early 2017, coupled with a line of virtual reality cameras, dubbed Ozo, may serve as the foundation for a significant business in the VR/augmented reality market down the road, but don't expect either developments to move the stock price in any meaningful way in 2016. But, with the Ozo priced at $60,000, it will only take a few thousand unit sales to represent a meaningful revenue contributor for Nokia.

Nokia is a 150 year old company that has survived and adapted to several periods of market innovation. The company is shareholder friendly and is prepping a capital return plan for investors in the form of dividends and share buy backs.

Technically, shares of Nokia have formed a bullish inverted head & shoulders; a measured move price target points to $9.00, representing potential upside of 22% from current levels.

Shares have been trading in a sideways channel for nearly two years, and a breakout above resistance near $8.50 would create room for shares to climb towards ~$11 resistance.

I am long shares of Nokia.
The Wall Street Fox

The Wall Street Fox utilizes fundamental and technical analysis to generate investment ideas. TWSF holds a MBA, and is currently preparing for the Chartered Market Technician (CMT) designation.

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