Nokia share price crashed and is about to form a death cross as its business trajectory worsened. Its stock plunged to a low of €3.73 in Paris, its lowest level since October last year. It has plunged by over 25% from its highest level this year.
Nokia hurt by tariffs and weak US dollar
Nokia, one of the largest providers of technology equipment to telecom companies, is not performing well as tariffs and a weak US dollar take their toll.
In a statement, the company said that its comparable net sales dropped by 1% in the second quarter. Most of this weakness was in its Nokia Mobile Networks division, whose revenue dropped by 13%.
The plunge was offset by better performance in its network infrastructure, cloud and networks, and Nokia Technologies. Its gross margin remained flat during the quarter, while the operating margin came in at 6.6%, a 200-basis-point decrease from the same period last year.
Nokia’ net profit rose to €96 million, a big increase from a loss of €512 million in the same period last year.
The management expects its business to improve in the second half. However, it expects that the stronger euro will have an impact of about €230 million. That’s because the euro has been in a strong uptren this year and is on the cusp of hitting the resistance level at 1.2000.
Nokia is impacted by currency because most of its sales are done in US dollars, while it reports in euros. At the same time, the company expects that tariffs will impact its profits by between €50 million and €80 million. Justin Hotard, the CEO said:
“Considering these two headwinds, we decided it was prudent at this point to lower our comparable operating profit outlook to a range of EUR 1.6 billion to EUR 2.1 billion from the prior range of EUR 1.9 billion to EUR 2.4 billion.”
Nokia and its key competitors, like Ericsson and Huawei are facing more headwinds. The widely expected windfall during the 5G migration did not happen as many analysts were expecting.
At the same time, Donald Trump’s tariffs have caused many telecom companies to slow their network upgrades.
Just last week, Ericsson’s stock plummeted after the company reported weak financial results, with revenue declining 6% to $5.8 billion. Like Nokia, it blamed its weakness on the weaker US dollar and slowing demand in its key markets like India.
Nokia share price analysis
The daily chart shows that the Nokia stock price has plunged in the past few months. It dropped from a high of €4.985 in April to a low of €3.8, its lowest level since October last year.
Nokia shares have moved below the important support at €3.950, its lowest level on April 7 this year. Moving below that level invalidated the double-bottom pattern.
At the same time, the stock is about to form a death cross pattern as the spread of the 50-day and 200-day moving averages narrows. Therefore, the stock will likely continue falling as sellers target the key support at €3.1, its lowest point on July 18. A move above the resistance level at €4 will invalidate the bullish view.
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