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Why Nokia Stock Dropped Today

Motley Fool - Fri Jul 14, 2023

What happened

Shares of communication networking company Nokia(NYSE: NOK) dropped on Friday after the company lowered its guidance in an unscheduled business update. As of 10:30 a.m. ET, Nokia stock was down about 10%.

So what

On April 20, Nokia reported financial results for the first quarter of 2023, with net sales rising 9% year over year. But CEO Pekka Lundmark warned, "We are starting to see some signs of the economic environment impacting customer spending." Today, those impacts to customer spending have officially lowered the company's full-year outlook.

Previously Nokia believed it would generate full-year net sales of 24.6 billion to 26.2 billion euros, or roughly $27.6 billion to $29.4 billion. However, today the company's management said, "Customer spending plans are increasingly impacted by high inflation and rising interest rates along with some projects now slipping to 2024."

Nokia consequently lowered its full-year net-sales guidance to 23.2 billion to 24.6 billion euros -- a decrease of 6% from the high points of the guidance ranges.

Now what

I suppose the silver lining here for investors is that Nokia's management believes that its current slowdown is only temporary -- it hasn't lost business, spending has just slipped to next year.

That may be. But in Q1, Lundmark said, "We started this year with the unveiling of a renewed corporate strategy and refreshed brand." To see growth waning this soon into a corporate refresh does cause one to wonder if management's plan is big enough to warrant a long-term buy-and-hold investment. I'd personally wait until Nokia strings together additional quarters of more promising growth before investing.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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