On Thursday, Nokia’s share price went down for more than 15%. This happened after the company reported a continuing decline in its telecommunication equipment installation business. The decline is expected to continue into the next year.
When releasing its third-quarter results, the company reported a 9% year-on-year drop in the networks business revenues. This decline included a 17% fall in the ultra-broadband division. However, the overall decrease in revenues were 7%. At the same time, adjusted earnings have doubled on a year-on-year basis, hitting $0.11 a share. This is more than the Wall Street target of $0.07.
Earlier in the year, industry analysts predicted a $510 million (EUR 432 million) in operating profits for the networks business in the same quarter. However, the profits tumbled down to EUR334 million. In a statement, CEO Rajeev Suri said, ‘we have made good progress in the quarter. However, the company has been experiencing several challenges in the mobile networks division of the business. Consequently, we have seen a consistent decline in our primary market that may go all the way to 2018.’
Based on the company’s estimate, there would be a continued decline in the range of 2-5%. According to the CEO, there are several reasons for the decline that include competition from the Chinese, increased multiple technology transitions and the shift towards consolidation, as seen with the telecom companies.
According to Suri, the company was fully committed to ensuring that everything is back on track. He also confided that they are making meaningful improvements in various sectors, such as Nokia’s Airscale business and telecom operator equipment sector.
Why is the Share Price Going down Amidst a Strong Bottom Line?
Investors have ignored the healthy bottom line in the third quarter, as seen in the report. They instead focused on the likely fallout in the soft wireless equipment in the future. This gloomy-looking future was the leading cause of the rapid decline in the share price.
Share Prices History and Forecast
According to the annual stock price data, Nokia has been experiencing a negative annual percentage change year on year since the 105.32% jump it experienced in 2013. In 2016, the average share price was 5.60920, with a high of 7.46000 and a low of 4.1200. It closed the year at 4.8100. This was a -31.48% change in the price. With the gloomy future, the stock price is expected to go down throughout two to three years. This year, the stock opened at 4.7700, but has generally been going down until the third quarter. With the report in place, many investors will be looking to offload their shares. According to the estimated movement in price, there should be a decline of between 2.5% and 3.14% decline in the share price.
Nokia is a leader in mobile communications. Over the years, it has shown enthusiasm and innovation in the industry. It is an experienced company that is making revenues in excess of $26.01 billion with a market capitalisation of $20.06 billion. Its market capitalisation is just below Motorola Solutions at $22.520 billion.