On Friday, Citi updated its assessment of Nokia OYJ (HE:NOKIA:FH) (NYSE: NOK), increasing the price target to EUR2.90 from the previous EUR2.70, while keeping a Sell rating on the stock. The adjustment reflects a nuanced view of the company's performance and prospects amid industry challenges.
Nokia, a global telecommunications equipment provider, is currently navigating through significant challenges in its three networking businesses. According to Citi, the company is experiencing industry-related pressure, as well as a specific impact from losing market share at AT&T (NYSE:T), a major U.S. telecom operator.
For Nokia to meet its revenue targets for 2024, it will need to achieve higher than typical sequential growth not only in the second quarter but also throughout the second half of the year. The firm notes that while orders in Nokia's Network (LON:NETW) Infrastructure are mounting, which may lead to improved quarter-over-quarter and year-over-year trends, the outlook for its Mobile Networks is less certain.
The visibility in the Mobile Networks segment is clouded by industry headwinds in both the U.S. and India, as well as the company's loss of market share at AT&T. Citi acknowledges that the first quarter of 2024 likely represents a low point for the Mobile Networks division, but emphasizes that substantial quarter-over-quarter growth will be necessary through the remainder of the year to reach even the low end of Nokia's projected -15% to -10% year-over-year range for 2024.
Despite these challenges, Nokia is seeing some positive momentum from cost-saving measures that are bolstering its bottom line. However, Citi's Sell rating is primarily based on the lack of confidence in Nokia's revenue outlook, especially considering the share loss the company is facing.
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