This week marks the first anniversary of Nokia’s meme journey. Could shares of the Finnish tech company spike once again in 2022, as they did for a moment last year?
Around one year ago to the day, Nokia joined the select group of meme stocks. In a matter of days in January 2021, Nokia stock rallied from $3.87 to $6.55, nearly doubling in value for not enough of a business fundamental reason.
Even before the start of February 2021, however, NOK had collapsed back to $4.50 apiece. Since then, the stock has traded only modestly higher. Today, shares are worth around $5.50.
Is this meme story finally over? Or could NOK rally on the back of another “meme attack” in 2022? Wall Street Memes takes a closer look.
Why NOK rallied in 2021
To understand if Nokia stock price can spike again, one must understand what made it do so one year ago. Arguably, it all started with a bullishreportfrom an analyst published on January 25, calling Nokia undervalued relative to rival Ericsson.
Of course, the research report alone could not have been enough to suddenly turn bears into bulls. What probably followed was a snowball effect that turned into an avalanche of retail investors following Nokia’s rally and putting money behind the meme story.
The chart below shows how popular the term “Nokia stock” became on Google during the week of January 24. Popularity picked up on the 27th and peaked on the 28th, the same day that NOK began to correct sharply: single-day loss of 28%.
What probably justified such a bullish move was Nokia’s elevated short interest.According to Seeking Alpha, the number of shares shorted roughly tripled from 20 million in March 2020 to 60 million in January 2021. That was a peak not reached since 2014.
With such bearishness towards NOK, bulls took advantage of increased popularity to try and force a short squeeze. Maybe, even if for a day or two only, the strategy worked.
Are the ingredients in place?
In my view, Nokia would need three key ingredients to come under “meme attack” in 2022 once again: (1) a spark, such as a positive earnings day or a bullish analyst report; (2) enough bears to attract the interest of bulls willing to take the other side of the bet, and (3) retail investors’ interest in putting money to work.
The first piece above may be the easiest to happen. Nokia continues to be a likely beneficiary of increased spending in 5G infrastructure. Recently, Morgan Stanley called it a top pick for 2022 for this and other reasons. Other bulls could come out in support of Nokia stock too.
The other two ingredients are less likely to be found. On the second point, Nokia’s short interest has dropped to around 40 million shares — although it is up from 25 million in April 2021, after bears were “flushed out” during the original meme rally.
On the third point, meme mania in general has lost steam in 2022. This is probably because of the end of fiscal stimulus that put money in the pockets of speculators in 2020 and 2021, and a market-wide correction that has taken a toll on other meme stocks this year and dampened enthusiasm.
Betting on Nokia stock for the long run might make sense, and a debate could be had about the investment opportunity here. But otherwise, I find it very unlikely that the stock will benefit from another meme attack in the foreseeable future.