How Much Downside Does Increased Competition Present For Nokia’s Stock?

+13.48%
Upside
3.54
Market
4.02
Trefis
NOK: Nokia logo
NOK
Nokia

There could be a 10% downside to our price estimate for Nokia if its market share in the wireless infrastructure domain falls moderately over our forecast period, compared to our current forecast of a stable market share going forward. Nokia’s merger with Alcatel-Lucent has made it a formidable player in the wireless market, especially in the U.S., thanks to Alcatel-Lucent’s strong ties with major telecoms in the country.

However, outside the U.S., Huawei could give the company a run for its money, as it remains the major player in the telecom hardware market in China and has strengthened its footing in Europe with its last year’s deal signing frenzy. Within the U.S., Ericsson’s partnership with Cisco allows it to offer end-to-end solutions to its customers, which should allow it to boost its share.

Our base case projects Nokia’s market share to increase significantly to 28.4% due to the merger, and remain stable over the next six to seven years. Simultaneously, we project network services and non-core revenues to increase at a compound annual growth rate of 9% between 2015 and 2022. For the downside case, we estimate Nokia’s wireless infrastructure market share to increase to 27.4% this year and gradually fall to 24% over the coming six years. Also, our downside case reduces the growth projections for network services and non-core revenues to 7.3%. This results in a 10% downside to our price estimate.

Nokia downside scenario

Nokia downside scenario part two

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Have more questions about Nokia? See the links below:

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Nokia
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