Goldman Sachs downgraded Nokia (NOK) shares to Neutral from Buy in a note Monday, citing lowered confidence in the Finnish telecommunications giant's product roadmap and competitive positioning. The investment bank also cut its price target on Nokia's stock to $3.0 from $5.10.
Goldman's downgrade comes in the wake of AT&T's decision to switch to ORAN-based networks, which will now largely be supplied by Ericsson. The bank also noted that commentary from US peers suggests continued weakness in demand for Fixed Line as customers digest existing inventories.
In addition, Nokia recently lowered its long-term EBIT margin target to above 13% by 2026 at the earliest, compared to the previous guidance of 14% by 2024-26. This move reflects the company's expectations for headwinds in the Mobile Networks segment.
Analysts noted that Nokia's shares have underperformed since being added to its Buy List on June 24, 2021. The stock is down 30.5% vs. the FTSE World Europe and down 36.6% vs. the S&P 500.
The investment bank attributed most of the underperformance to the factors mentioned above, as well as unfavorable cyclical dynamics in key end markets.
While analysts believe that Nokia has made progress in improving its wireless portfolio, there is now less confidence in the company's ability to win back market share based on product improvements alone. The AT&T loss is seen as a setback in this regard.