Nokia said revenue would decline for a second consecutive year in 2021.
Getty Images
Nokia stock tumbled 7% early on Thursday, as the telecom-equipment maker beat expectations in the fourth quarter but warned 2021 would be a “challenging” year.
The stock has been on something of a roller-coaster ride in recent weeks, becoming one of the favorites stocks among retail investors on Reddit’s WallStreetBets forum. It was on the move again in early trading, falling 7%, while the Finnish-listed shares slipped 4%.
The shares climbed 55% in the space of three days last week, prompting the company to release a statement saying it could not explain the rally. It has since retreated close to 30% but remains 11.5% up year-to-date, while the Finnish-listed stock has gained 15% so far in 2020.
Read:Nokia Says It Can’t Explain Its 70% Stock Surge
Citi analysts said recent retail investor influence may result in “atypical volatility” in trading on Thursday ahead of the company’s earnings call.
The company’s fourth-quarter earnings were stronger-than-expected as sales fell 4.8% to €6.57 billion, beating the FactSet consensus of €6.4 billion, driven by 5G margin expansion. Adjusted net profit of €814 million also beat the consensus of €622 million.
Nokia and its Nordic rival Ericsson have benefited from a number of countries banning China’s Huawei from 5G networks on national security grounds. Ericsson’s impressive earnings last week suggest that it has felt more of that benefit so far than Nokia.
Read:Nokia Gets an Upgrade Because Ericsson’s Earnings Were So Good
The Finnish company said its rate of converting its 4G footprint into 5G in 2020 was affected by shortfalls in North America and China but offset by footprint gains in Europe. It lost out to Samsung on a huge $6.6 billion 5G deal with Verizon in September.
Nokia said revenue would decline for a second consecutive year in 2021—expecting net sales to be between €20.6 billion and €21.8 billion, after falling 6% in 2020 to €21.9 billion.
“We expect 2021 to be challenging, a year of transition, with meaningful headwinds due to market share loss and price erosion in North America,” said Chief Executive Pekka Lundmark.
Citi analysts said the 2021 revenue outlook seemed broadly in line and was “less bad than feared by some on the buy side.”
Kepler Cheuvreux analysts said that despite short-term headwinds the valuation remains “undemanding.”
“The company is investing in R&D [research and development] to create momentum and pick up market share within 5G. We maintain a Buy recommendation because expectations have been revalued and the valuation is still not demanding,” they said.
Lundmark, who has been at the helm since August 2020, promised the company would do “whatever it takes” to lead in 5G, when he unveiled a new strategy in October.
