Nokia (NYSE:NOK) continues to operate as the most inconsistent telecom and technology giant. Its third-quarter report reminded investors why the stock cannot sustain an upward trajectory.
Nokia posted revenue declining and reset expectations. Either the outlook sets up a Q4 beat or Nokia is suffering from a lack of solid footing in its core business. The firm posted net sales falling 7%, driven mostly by lower services in its Mobile Access business. Its new CEO, Pekka Lundmark, forecast an operating margin of 7-10% for 2021. For 2020, its EPS outlook is EUR 0.23, down from EUR 0.25.
Nokia will restructure the business into four business groups, with each unit having its market leaders. The CEO promised more transparency and accountability. But the lack of management cuts should not convince investors that anything will change. Nokia’s 5G business needs to get aggressive, taking nearly all of Huawei’s business. Conversely, the company signaled troubles ahead in winning business in China.
Without contract wins in China, Nokia will have a harder time growing revenue. It also has to make up for losing the Verizon (VZ) contract to Samsung.
Nokia has no clear stock direction in the near-term. Investors who do not have a position should continue trading the stock, buying on the dip, and selling on the bounce.
Disclosure: the author owns shares of Nokia.
