The networking and communication industry has become bedrock for many organizations and businesses that are seeking to recover from COVID-19-pandemic-led damages and build new operational structures that are suited to the new reality created by the pandemic. As such, the growing adoption of edge computing, IoT, 5G solutions, and other advanced technologies, which help businesses work more effectively, should keep driving the growth of networking companies.
The demand for networking solutions has been increasing in healthcare, manufacturing, retail, and other industries. And as next-generation communication technology explodes, with many organizations adopting hybrid work models, the demand for more widespread network connectivity should increase.
So, in the event that you have set aside $5000 to invest in stocks that you plan to hold for the long haul, we think you should consider investing in Motorola Solutions, Inc. (MSI) and Nokia Corporation (NOK). These two networking companies have been expanding their mobile networking solutions and enhancing their next-generation technology capabilities to capitalize on the industry tailwinds.
Motorola Solutions, Inc. (MSI)
Leading data communications and telecommunications equipment provider MSI offers mission-critical communications and analytics solutions in the United States, the United Kingdom, Canada, and internationally. The Schaumburg, Ill., company operates through Products and Systems Integration and Services and Software segments. It offers services to more than 100,000 public safety and commercial customers globally.
On July 19, MSI introduced its Compass Decision Management System, the newest addition to its video security and analytics portfolio. The system will allow it to provide organizations with solutions to respond to real-time events, such as intercom calls, intrusion, and fire alarms, and have full visibility into their security operations.
Also this month, the company agreed to acquire Openpath Security Inc., a mobile access control provider. MSI expects to close the transaction by month’s end. The acquisition should enable the company to provide situational awareness to its clients by combining its video security and access control solutions.
During the fiscal first quarter, ended April 3, 2021, MSI’s net sales were $1.77 billion, representing a 7.1% increase from the prior-year quarter, driven by North American and international growth. Its non-GAAP operating margin was 23.2%for this quarter, up from 21% in the year-ago quarter. The company’s net income came in at $244 million, up 23.9% year-over-year. Its non-GAAP EPS increased 25.5% year-over-year to $1.87. MSI’s operating cash flow totaled $370 million, compared to $308 million in the prior-year period.
A $2.10 consensus EPS estimate for the next quarter, ending September 2021, represents a 7.7% improvement year-over-year. The $8.08 billion consensus revenue estimate for the current year represents a 9% increase from the same period last year. MSI’s stock has gained 55.9% over the past year to close yesterday’s trading session at $220.12.
It’s no surprise that MSI has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
MSI has a B grade for Growth, Stability, and Quality. Of the 55 stocks in the Technology – Communication/Networking industry, it is ranked #9.
Click here to view additional MSI ratings for Momentum, Value, and Sentiment.
Nokia Corporation (NOK)
Based in Finland, NOK is a global leader in mobile and fixed-network solutions. It operates through Mobile Networks, Network Infrastructure, Cloud and Network Services, and Nokia Technologies segments. The company provides IP/optical networking solutions, fiber access products, network infrastructure and professional services, and maintenance services.
This month, NOK and Vodafone launched a jointly developed machine learning product—Anomaly Detection Service—on Google Cloud, to detect and troubleshoot irregularities that could have an impact on customer service quality. This development should allow NOK to highlight its technology leadership and boost customer service.
On July 19, the company announced that it was chosen by Taiwan Star Telecom to extend its 5G installed base and provide equipment from its comprehensive AirScale portfolio for better coverage and performance. The deal should enhance NOK’s 5G footprint across the country and offer seamless solutions to TST’s subscribers.
NOK’s comparable net sales rose 3% from the prior-year quarter to €5.08 billion ($6.15 billion) for the first quarter, ended March 31, 2021. The company’s gross margin improved 180 basis points year-over-year to 38.2%. Its operating profit grew 375% year-over-year to €551 million ($668.01 million), while its comparable profit increased 1,036% from the year-ago value to €375 million ($454.64 million). Furthermore, its EPS amounted to €0.07 ($0.08), representing a 600% increase year-over-year.
Analysts expect NOK’s EPS for 2022 to increase 6.9% year-over-year. The company’s revenue will likely grow 3.5% in the current year and 2% next year. Over the past year, the stock has gained 27.8%. Also, NOK’s stock has returned 47.1% so far this year. It closed yesterday’s trading session at $5.75.
NOK’s POWR Ratings reflect this promising outlook. It has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Growth and Sentiment, and a B grade for Value. It is ranked #11 of 55 stocks in the Technology – Communication/Networking industry.
In addition to the grades we’ve highlighted, one can view NOK ratings for Stability, Momentum, and Quality here.
MSI shares were unchanged in premarket trading Friday. Year-to-date, MSI has gained 30.39%, versus a 17.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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