A Midseason Coaching Change May Not Be Enough to Save NOK Stock

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With 2020 widely viewed as the year that the widely anticipated 5G rollout will take shape, it’s fair to say that the “game” of 5G is in the mid-stages right now. Keeping with the sports metaphors, Nokia (NYSE:NOK) just changed its coach in the middle of the game, but NOK stock might be too far gone to save.

A Midseason Coaching Change May Not Be Enough to Save NOK Stock

Source: RistoH / Shutterstock.com

Earlier this week, the Finnish company said Pekka Lundmark will replace Rajeev Suri as chief executive officer in September. Lundmark formerly held high-level positions at Nokia and is expected to work new chairman Sari Baldauf in a move that harkens back to an era in which the company was the world’s dominant maker of mobile phone handsets. Thing is, that was a long, long time ago.

“Together we can create shareholder value by delivering on Nokia’s mission to create the technology to connect the world,” said Lundmark in a statement. “I am confident that the company is well-positioned for the 5G era and it is my goal to ensure that we meet our commitments to our customers, employees, shareholders and other stakeholders.”

Corporate pleasantries are, well, pleasant, but NOK stock paints a different picture of how markets are digesting the executive shuffle.

After falling 5.18% on Thursday on above-average volume, NOK stock enters Friday down 7.58% this week, confirming that it’s going to take more than changes in the C suite to get investors excited about this name.

Will It Work?

The practice of rehiring past executives or even elevating them as Nokia is doing with Lundmark is not unusual in the universe of publicly traded companies. Procter & Gamble (NYSE:PG) brought A.G. Lafley back as CEO in 2013 to some success and, in perhaps the most famous redemption story in Corporate American history, Steve Jobs returned to lead Apple (NASDAQ:AAPL) years after being fired from the company he co-founded.

It’s not a slight on Lundmark, but he’s not Steve Jobs and he probably isn’t even Lafley. Interestingly, a study by the University of Pennsylvania’s Wharton School of Business indicates Lundmark could be the beneficiary of good timing with emeritus management professor Lawrence G. Hrebiniak using the example Charles Schwab returning to his eponymous firm at a trying time for the company.

“He came back right after the tech bubble burst — and when you’re coming in when things are at the bottom [and] things can’t get worse, there’s a higher probability they will get better,” said Hrebiniak.

To be fair, neither Herbiniak nor the Wharton study mention anything about Nokia. However, with NOK stock down 40% over the past year and trading below $4, it’s clear Lundmark isn’t taking on an easy job.

Time will tell if Lundmark is the right person for the job, but while Nokia shares haven’t positively reacted to the executive switch, some analysts like the move.

“We believe a change of management is positive for Nokia, which has been struggling with significant levels of senior management turnover amid weak profitability and losses of market share,” said Liberum analysts in a recent note.

Bottom Line on NOK Stock

Nokia is the epitome of a “show me” stock. Led by Lundmark, the new team at the top must show investors the company is capable of executing on its 5G strategy. With Chinese rival Huawei Technologies under intense scrutiny from Uncle Sam, there are opportunities for the company to make inroads. Even with that, NOK stock is a long-term turn around story; miracles will not be worked overnight.

Still, near-term issues – namely declining margins and an eroding cash position – linger at Nokia. Those situations won’t be rectified overnight, either, indicating interested buyers may be able to get the stock at lower prices than where it resides today.

As of this writing, Todd Shriber did not own any of the aforementioned securities. He has been an InvestorPlace contributor since 2014.

Todd Shriber has been an InvestorPlace contributor since 2014.


Article printed from InvestorPlace Media, https://investorplace.com/2020/03/coaching-change-save-nok-stock/.

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