Shares of Nokia fell as much as 9% on Thursday after the company announced 2021 will be a “challenging” year and forecasted a revenue contraction.
Nokia did manage to beat analysts’ earnings estimates by €0.03 to reach non-GAAP earnings per share of €0.14 in the quarter, according to regulatory filings. And the company beat revenue estimates as well, hitting €6.57 billion in net sales for the quarter.
However, the Finnish Telecommunications firm said its net sales will be affected by a decline in mobile-network revenue going forward as the company was unable to convert all of its 4G footprint to 5G during 2020.
“We expect 2021 to be challenging, a year of transition, with meaningful headwinds due to market share loss and price erosion in North America,” Pekka Lundmark, Nokia’s CEO, said.
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Lundmark also noted he will be forced to sacrifice short term margins in 2021 to make “further 5G R&D investments” and maintain market share.
There were a few bright spots in the most recent quarterly earnings report, however. Free cash flow rose to €778 million in the quarter, and the company has significant cash reserves to continue its 5G buildout in 2021.
Overall though, investors weren’t pleased with the quarterly results from Nokia. Net sales grew just 1% on a constant currency basis, and operating profit fell 41% year-over-year to €475 million.
The poor earnings performance comes after a wild few weeks for the company. Nokia was caught up in a Reddit-fueled frenzy on heavily-shorted stocks, and for a while, shares were jumping.
However, when brokerages began implementing restrictions on trading in the popular names because they were unable to maintain financial requirements from their clearinghouses, shares in the pumped-up stocks fell sharply.
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“It has nothing to do with our business. As a CEO, what can I say? The only thing I can do is focus on my business.” Nokia’s CEO Pekka Lundmark told Bloomberg when asked about the phenomenon. “It is strange. We are only watching on the sidelines.”
Despite a wild ride in January, shares of Nokia are up just 11% on the year so far.
Still, analysts remain mostly bullish on Nokia’s prospects going forward; the company boasts 12 “buy” ratings, 16 “neutral” ratings, and just two “sell” ratings.