- Nokia shares fell on Tuesday amid a broad sell-off of stocks traded heavily by Reddit's WallStreetBets forum.
- The company will report earnings on Thursday and is expected to benefit from 5G cycle strength similar to its peer Ericsson.
- DNB Markets analyst Frank Maao upgraded Nokia to a "buy" and raised his price target to €4.80.
Shares of Nokia tumbled as much as 10% on Tuesday as a broad Reddit-stock sell-off hurts results, offsetting a recent analyst upgrade.
Finnish Telecommunications provider Nokia was one of a handful of stocks caught up in Reddit-fueled short-squeeze attempts over the past few weeks as traders targeted legacy tech names.
The day-trading frenzy drove shares of GameStop 400% higher last week and over 1600% higher in January before shares fell back to Earth in the last few days.
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Analysts were wary of the move higher in Nokia's share prices. DNB Markets analyst Frank Maao double downgraded Nokia to "sell" from "buy" with an unchanged price target of €4 after the stock became a Reddit favorite.
Maao called the recent share price rally a "Reddit retail frenzy" and "bubble-like behavior" in a research note.
Then on Monday, Maao upgraded Nokia back to "buy" and raised his price target to €4.80 after rival telecommunications company Ericsson produced standout results in its recent earnings release. The results illustrate 5G cycle strength in Northeast Asia, according to the analyst.
Ericsson's total revenue rose 5% to 69.6 billion crowns in the quarter, beating estimates of 68.35 billion crowns. And even more impressively, the company's core networks business saw margins grow to 43.5% from 41.1% a year ago, on a 20% rise in sales.
When Nokia reports earnings on Thursday, analysts expect to see similar tailwinds from 5G cycle strength in the company's core networks business.
On Tuesday, Nokia also announced it will partner with the Singaporean telecommunications company StarHub to expedite standalone 5G services for customers in Singapore.
The two companies have teamed up to deploy a new cloud-native 5G core network that will manage rapidly growing 5G standalone bandwidth demand.
The move lends more credence to DNB Markets analyst Maao's predictions about 5G cycle strength.
"We are seeing strong demand for 5G phones and good take-up of our Mobile+ and Biz+ 5G capable plans launched last August – encouraging signs of the market's appetite for 5G services, which are going mainstream in terms of deployment and adoption this year." Chong Siew Loong, Chief Technology Officer of StarHub, said in a press release.
Analysts are mostly bullish on Nokia's prospects going forward, citing 5G potential in the name. The company currently boasts 12 "buy" ratings, 15 "neutral" ratings, and just two "sell" ratings from analysts.
Nokia traded at $4.52, down 7.67%, as of market close on Tuesday, giving the company a market cap of $25.47 billion.