Top Analyst Believes Nokia Oyj (ADR) (NOK) Management Meeting Calms Investor Fears Following Q3 Share Weakness

Michael Walkley deems the big sell-off last week an overreaction; NOK boasts enticing long-term potential.


Top analyst Michael Walkley is sharing cautiously optimistic insights on Nokia Oyj (ADR) (NYSE:NOK) after hosting “constructive” investor meetings with CEO Rajeev Suri, leaving the analyst positive on the Finnish telecom giant’s long-term strategy execution as well as its “well-positioned” standing in the 5G market.

Just one week ago, there was a stark 21% pullback in the stock when NOK released third quarter earnings where revenue came up short of Street-wide expectations and the fourth quarter market guide for 2017 was brought down even lower to a 4% to 5% tumble.

However, as far as Walkley sees the market panic, he finds that “the recent sell-off post Q3 earnings was overdone,” and maintains a Hold rating on NOK stock with a price target of $5.50, which implies a close to 10% increase from current levels.

One key takeaway from the management meeting shows the Finnish telecom giant in the light of “long-term industry leader,” where the analyst anticipates the company can take advantage of a 5G ramp from carrier investments kickstarting in 2019 with even more promising gains come 2020 and onwards.

Ultimately, “During our meetings, we believe management helped ease investor fears regarding several issues we address in this report including Q3 cash flow and working capital management, increased swap out charges, increased price competition for the China 4G tender, slightly reduced guidance for 2017, and initial cautious outlook for 2018. While management addressed its market outlook for 2018 expectations of a networks market decline of 2-5%, we believe Nokia has the portfolio to potentially outperform this market forecast given its steady progress in adjacent market opportunities. Management highlighted factors impacting the weaker Networks outlook through 2018 include a softer North American market due in part to consolidation activity and an increasingly price-competitive China market with Ericsson and other OEMs attempting to grow market share and increase footprints ahead of the 5G upgrade cycle,” contends Walkley, who is apprehensive on macro outlook, but intrigued by 5G ramp prospects down the line.

Michael Walkley has a very good TipRanks score of 67% success rate and a high ranking of #42 out 4,702 analysts. Walkley garners 19.4% in his yearly returns. However, when recommending NOK, Walkley forfeits 6.5% in average profits on the stock.

Analyst consensus points to the sidelines on this Finnish telecom giant, where Walkley’s vote of caution rings loud, with TipRanks analytics exhibiting NOK as a Hold. Based on 6 analysts polled by TipRanks in the last 3 months, only 1 rates a Buy on Nokia stock whereas the remaining 5 maintain a Hold. The 12-month average price target stands at $4.83, marking a 3% downside from where the stock is currently trading.