Why Nokia shares rose on Wednesday

Key Turning Point in Telecommunications

On Wednesday, Nokia shares attracted the attention of investors, showing an increase of over 3% at the end of the trading session. This significantly outpaced the S&P 500 index, which rose only 0.2% during the same period. The reason for this surge was a change in an analyst's recommendation regarding the European telecommunications giant.

Potential breakthrough due to recent acquisition

Before the market opened, Jacob Blustone from BNP Paribas Exane raised his rating on Nokia shares to “outperform the market” ( effectively “buy” ) from the previous “neutral” status. His target price for Nokia shares in the European market is €4.30 per share.

According to available information, Blustone's updated view on Nokia is largely based on its latest major acquisition. In June last year, the company entered into an agreement to purchase the American technology and telecommunications equipment supplier Infinera for $2.3 billion, which was completed in February.

According to the analyst, the integration of Infinera opens up opportunities for Nokia to benefit from investments in the development of capabilities that go hand in hand with the current wave of data center expansion. These facilities are being modernized and expanded to meet the growing demands for resources related to artificial intelligence.

Bluestone noted that currently Nokia's revenue from projects with hyperscalers accounts for only 5% of the total revenue. Considering the high demand from such clients, this percentage could increase significantly.

Business Transformation

At the beginning of the mobile phone era, Nokia held a dominant position, especially as a handset manufacturer. However, the company failed to successfully adapt to the subsequent era of smartphones. Since then, Nokia has shifted its focus to supplying networking technologies and related solutions that underpin the telecommunications industry.

With Nokia's acquisition of Infinera, there is a chance to catch luck by the tail. In this regard, Blustone's new optimistic forecast seems quite realistic.