Nokia's Q2 Shows 5G Momentum Outweighing Supply Chain Challenges; Raising FVE to $5.90

We are raising our fair value estimate of no-moat Nokia to $5.90 from $5.70 (raising to EUR 5.70 from EUR 5.40 to incorporate foreign exchange rates) after its first-quarter results exceeded our expectations for both revenue and adjusted earnings. Shares gained around 8% after the release, and we view shares as undervalued. Although Nokia continues to be hampered by supply chain challenges, profitability was bolstered by margin accretive updated chip shipments and momentum in 5G buildouts and fiber deployments. Management noted that they see signs of supply chain challenges easing through the second half of this fiscal year and the first half of fiscal year 2023. We view the continued product demand in spite of these short-term headwinds as a testament to the global trend of 5G buildouts and a strong opportunity for Nokia when the supply limitations subside.