Nokia (HLSE:NOKIA) Stock Could Be 20% Cheap Following Expanded 5G AI Deal
Nokia Oyj stock has returned 179.5% over the past three years, yet the current checks paint a mixed valuation picture, with the Discounted Cash Flow (DCF) intrinsic value estimate suggesting the shares trade at about a 20.4% discount while market based multiples look closer to fair.
- A 179.5% return over three years puts Nokia Oyj firmly in the group of strong outperformers, which can reduce the margin of safety investors usually look for.
- Growth in AI and cloud related network deals, along with recent 5G partnerships, can support expectations for future cash flows. However, ongoing restructuring and related costs may introduce uncertainty around how much of that cash ultimately reaches shareholders.
- Nokia Oyj scores 3 out of 6 on the broader valuation checks, pointing to a mixed picture rather than a clear bargain or clear overvaluation.
The stock's next move may depend on whether investors give more weight to the discounted intrinsic value estimate or to the idea that, after such strong gains, Nokia Oyj is already priced about right on market multiples.
Is Nokia Oyj Still Cheap on Cash Flow?
The Discounted Cash Flow (DCF) model estimates what Nokia Oyj is worth based on the cash it is expected to generate in the future. Nokia Oyj currently produces latest twelve month free cash flow of about €1.41b, and the DCF framework assumes those cash flows keep growing rather than shrinking over time. On that basis, the model arrives at an intrinsic value of around €11.52 per share.
With the DCF suggesting the stock trades at roughly a 20.4% discount to this intrinsic value, Nokia Oyj screens as cheaper than its cash flow profile implies. Because Nokia's recent 5G and AI focused agreements, such as the expanded 5G deal with Taiwan Mobile, relate directly to future network related cash flows, these cash flow projections may not yet be fully reflected in the current price.
Overall, the DCF workup indicates Nokia Oyj currently appears undervalued relative to the cash flows implied by its business today.
Our Discounted Cash Flow (DCF) analysis suggests Nokia Oyj is undervalued by 20.4%. Track this in your watchlist or portfolio, or discover 234 more high quality undervalued stocks.
Where Does Nokia Oyj Sit on Earnings?
The P/E ratio is a useful way to look at Nokia Oyj because earnings are still a key anchor for how many investors think about telecom and networking stocks. Nokia trades on a P/E of about 66.4x, which is well above the Communications industry average of roughly 37.0x and also below a peer group average of around 83.5x. That places Nokia in the upper part of the range for earnings-based valuations, but not at the very top compared with close peers.
A more tailored benchmark, which blends Nokia Oyj’s growth profile, margins, size and risk, points to a fair P/E ratio of about 65.4x. The current multiple only slightly exceeds this level, so the gap between price and this earnings-based yardstick is small. For investors, that suggests the market already prices Nokia as a higher-multiple stock within its sector, but not in a way that stands out as extreme when set against the company’s current fundamentals.
On the P/E multiple, Nokia Oyj looks priced roughly in line with what its earnings profile would suggest.
See what the numbers say about this price — find out in our valuation breakdown.
The Nokia Oyj Narrative: What Would Justify Today's Price?
Simply Wall St Narratives pick up where Nokia Oyj's valuation puzzle leaves off. They spell out which assumptions about its future growth, margins and earnings would need to hold for the stock to be worth materially more or less than today's price. Each narrative treats fair value as a thesis about Nokia Oyj's business that can be revisited over time. They sit on Simply Wall St's Community page for you to track as conditions change.
Community views on Nokia Oyj sit far apart, with one side leaning into AI and optical growth potential while the other questions how much of that story is already in the price.
Bull case: 15% undervalued
"Investments in innovation (such as cybersecurity, AI network solutions, and next-gen optical technology) plus expanding monetization of IP and patents should increase Nokia's high-margin revenue streams..."
Read the full Bull Case to see why Nokia Oyj could be undervalued
Bear case: 97% overvalued
"The network infrastructure industry is experiencing ongoing commoditization, leading to intense price competition and margin compression; this environment could erode Nokia's pricing power and result in structurally lower gross margins and operating margins..."
Read the full Bear Case to see why Nokia Oyj could be overvalued
Do you think there's more to the story for Nokia Oyj? Head over to our Community to see what others are saying!
The Bottom Line
For Nokia Oyj, the Discounted Cash Flow (DCF) work suggests the stock is undervalued, while the earnings multiple points to pricing that already looks about right relative to peers. That gap reflects different emphases: the intrinsic value view leans on cash flow strength, and the multiple view reflects how much growth and sentiment are already embedded in the P/E. Given the mixed broader checks, the key question from here is whether Nokia can convert its AI, cloud and 5G pipeline into durable, shareholder friendly cash flows rather than just higher expectations in the share price.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com