What Are The 3 Risks To Nokia Stock?

Upside to Nokia Oyy's (NYSE: NOK) stock is likely to be limited by the peaking 5G RAN (Radio Access Network) cycle, looming tech disruption, stiff competition and the company’s unimpressive growth and margin outlook, according to BofA Securities.

The Nokia Analyst: Didier Scemama reinstated coverage of Nokia with an Underperform rating and a price target of $5.02.

The Nokia Thesis: Although some initiatives to boost gross margins and control operating expenses could support margins, the company is unlikely to meet the consensus earnings estimates for 2021, Scemama said in the reinstation note.

The analyst mentioned the following risks:

• The 5G RAN market could peak in 2021 and decline gradually to 2025, exerting pressure on Nokia’s pricing and margins.
• “O-RAN and virtualization lower the barrier to entry for new entrants from Enterprise IT sectors, which are used to operating in razor-thin, commodity markets,” he wrote.
• Although Nokia may face lower competition from Chinese OEMs in Europe, “this is likely offset by lower market share in China.”

“In the US, the eruption of Samsung on the market (winning Verizon at the expense of Nokia) signals that market consolidation (ALU/Nokia) has not resulted in improved pricing power or higher stickiness,” Scemama further said.

NOK Price Action: Shares of Nokia had declined by 2.81% to $5.72 at the time of publication Monday morning.

Photo: Courtesy Nokia