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The telecommunications sector has been largely overshadowed by the effects of the Covid-19 pandemic.
Agence France-Presse / Getty Images
Swedish telecoms giant
Ericsson
posted so good earnings last week that hope has spread to
Nokia,
which received an update on Monday from Norway ‘s largest investment bank.
DNB Markets developed Finnish Nokia to buy from retail and raised the target price on the stock from € 4 ($ 4.83) to € 4.8.
Nokia was taken into the scene last week and its stock rose amid a broader retail trading frenzy, but shares in Nokia fell nearly 2% in trading on Monday, hovering around for € 3.95. The stock started last week at € 3.83 before entering 12.9% on Monday and then 13.8% on Wednesday, reaching € 4.40. It then fell 13% on Thursday.
The fact that the price of the shares provided gains from last week’s rally is one reason why DNB Markets raised the stock. “Relevant reading” from Ericsson’s recent strong findings played an important role.
Last Friday, Ericsson announced that it had gained market share in Europe, as it was going to be a more profitable 5G player with stronger margins. The stock jumped 8% after the company posted disappointing operating income figures.
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“While Ericsson has clearly taken market share from Nokia in recent years, we believe that recent tailwinds are due to geopolitical factors,” said Frank Maaø, an analyst at DNB Markets.
Ericsson said it saw strong preorder signals from buyers in the next quarter. Maaø said this was in line with a DNB investigation that officials at companies were measuring the risks of investing in 5G technology from Chinese telecom Huawei, which was banned from some Western networks.
“We believe Nokia, which is gradually catching up to 5G [radio access networks], it would also be a key benefit of that move, ”said Maaø.
DNB’s view is that there could be a momentum build in 5G equipment demand from operators currently sourcing the gear from Chinese suppliers. These operators could “feel more of a crisis in 2021 to diversify and destroy their provider base,” Maaø said, and Nokia is expected to be a “key beneficiary” of this move. .
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In addition, Ericsson has tripled business in Japan over the past three years as the rollout of 5G has picked up speed. Maaø said: “Nokia should benefit from this as well, given its position with all Japanese operators.”
DNB Markets also listed Nokia’s capital markets day in March as another stimulus for confidence in the company’s ability to return to higher margins in the medium and long term.
The telecommunications sector has been largely overshadowed by the effects of the Covid-19 pandemic. Millions of people at home and working from home through locks have a high demand for keeping services high.
The pandemic delayed what many investors expected to be a 5G “supercycle” – a huge growth in stocks open to the next generation of mobile internet technology. As 2021 progresses, investors are keeping a close eye on new developments in 5G.