Shares of Nokia sank almost 6% in morning trading as the telecom network company said it expects this year to be challenging due to revenue headwinds in the US.
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Nokia (NOK) sees this year’s sales declining to between €20.6 billion-€21.8 billion, from €21.9 billion in 2020. Operating margin is forecasted to range between 7% to 10% in 2021.
“We expect 2021 to be challenging, a year of transition, with meaningful headwinds due to market share loss and price erosion in North America,” Nokia CEO Pekka Lundmark said. “Additionally, delivering on our new operating model for a strong and sustainable long-term business requires us to make further 5G R&D investments in 2021, meaning we will sacrifice some short-term margin to ensure leadership in 5G.”
During the fourth quarter, the company’s revenues declined 5% year-on-year to €6.6 billion, but came in ahead of consensus estimates of €6.4 billion. Nokia reported diluted earnings per share (EPS) of €0.15 beating analysts’ estimates of €0.11.
Lundmark told Reuters on Feb. 4 regarding 5G contracts in China that, “We have not yet made a breakthrough in 5G (in China) but of course we are not excluding that possibility going forward. But we want to be prudent so that we do not want to be there at any cost.”
According to Reuters, the company also said that it lost a part of its 5G contract with Verizon (VZ) in the US to Samsung Electronics.
On Feb. 1, DNB Markets analyst Frank Maao raised the price target from €4 to €4.80 and also upgraded the stock from Sell to Buy, citing “5G cycle strength in Northeast Asia excluding China.”
The Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 3 analysts recommending a Buy and 2 analysts suggesting a Hold. The average analyst price target of $4.73 implies 7.5% upside potential to current levels.
According to TipRanks’ Smart Score system, NOK gets a 5 out of 10, which indicates that the stock is likely to perform in line with market averages.
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