Should you invest in Nokia in Q3 after JPMorgan upgrade?

Nokia Corp (LON:0HAF) stock created a price gap on Tuesday, rallying to close at $5.88 per share after JPMorgan Chase analysts said they expect to lift sales and operating margin targets for fiscal 2021. 

The NOK stock price also popped slightly on Tuesday to extend gains before pulling back to an intraday loss of 0.68%.

However, JPM remains optimistic about NOK’s prospects after raising its price target to $7.80 per share, representing more than a 32% premium on Wednesday’s closing price. In addition, they said they expect several rounds of upgrades on NOK to follow.

So, should you invest in Nokia stock in Q3 2021?

Nokia is an exciting growth stock based on its investments in 5G networks. The company recently launched AirScale 5G portfolio to cement its position in the provision of 5G networks in the EU region. 

The company’s new portfolio of products will enhance its coverage capacity widening its addressable market. Therefore, Nokia’s top line could witness significant growth in the coming years, boosting its bottom line. 

From a valuation perspective, the company’s stock trades at an attractive forward P/E ratio of 18.73. Its price-free cash flow of just 12.04 indicates a solid financial position, giving it great flexibility to invest in new products. Moreover, Nokia’s earnings will resume growth next year at about 9% after suffering from the pandemic in 2020 and 2021. Analysts expect its EPS to grow at an average of 16.53% in each of the next five years, making it an attractive long-term buy.

Technical overview: my NOK stock price prediction for Q3 2021

Technically, Nokia shares appear to be trading within an ascending channel formation in the daily chart. The stock pulled back slightly on Wednesday after advancing to overbought conditions of the 14-day RSI. The pullback could be temporary ahead of earnings growth next year.

JPM has a 12-month price target of $7.80, but the stock could soon hit $6.50 before extending to trade closer to $8.00 when earnings growth resume next year. The support level is approximately $5.30.

Bottom line: the catalyst for buying Nokia long term

Although Nokia is yet to return to profitability amid the pandemic, analysts expect significant earnings growth over the next five years. The company’s 5G plan will be central to this growth, and JPM’s latest price target upgrade could be the catalyst for a significant rally in the NOK stock price.