Nokia stock extends gains to 6-month high after JP Morgan says it’s time to buy

The shares of Nokia Corp. extended the previous session’s rise to a six-month high on Wednesday, after JP Morgan analyst Sundeep Deshpande turned bullish on the network equipment company, citing a “turnaround” in gross margin in its mobile network business.

The US-listed share of the Finnish company NOK,
+ 0.77%

+ 0.55%
gained 0.2% in active midday trading, setting it on track for the highest close since Jan. 27, when it benefited from meme stock status. Trading volume has already reached 33.5 million shares, compared to a daily average of 35.6 million shares in the last 30 days.

On Tuesday, the stock jumped 9.5% to volume of 112.9 million shares after Nokia announced plans to increase its financial guidance for the full year, following the results “strong” from the second quarter. Nokia is expected to release its second quarter results on July 29.

Deshpande raised its overweight rating, a year after lowering the stock to neutral. He raised his price target on US-listed stocks by 81%, from $ 4.30 to $ 7.80. The stock has not hit $ 7.80 since April 2015.

He believes the positive trends seen by Nokia in the second quarter “are just the start” of an upgrade cycle, which will lead to higher mobile network gross margin.

“We believe investors should position themselves for the upgrade cycle which is expected to continue to unfold over the next 12 months,” Deshpande wrote in a note to clients, with his new target implying a gain of over 30% compared to current levels.

FactSet, MarketWatch

He noted that consensus analysts expect the mobile networks’ gross margin in the second quarter to decline 1.26% from a year ago, even though it rose 2.2% over the course of the year. the first quarter, which is generally the worst quarter of the year for Nokia. Learn more about Nokia’s first quarter results.

Deshpande said he believes the gross margin of mobile networks is unlikely to decline, given that “more and more” equipment is now being shipped.

“So, we are now fairly confident that the consensus gross margin for this division is wrong and that Nokia’s gross margin in mobile networks will be stable or increase year over year, with a related positive impact on the market. operating profit, ”Deshpande wrote.

Nokia’s stock has climbed 50.6% year-to-date, while SPDR Communication Services’ XLC exchange-traded fund,
+ 0.14%
gained 21.7% and the S&P 500 SPX index,
+ 0.19%
gained 16.5%.

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