Nokia’s Rally May Be Over as Analysts Tell Investors to Take Profits

Grupo Santander analyst Carlos Trevino has downgraded Nokia (NYSE:NOK) to Underperform from Outperform, setting a price target of EUR 6.85 and signaling that the telecom equipment rally has run its course. With Nokia shares up 21.04% year-to-date and 51.54% over the past year, Santander’s call reflects a view that the telecom equipment rally has run its course and current valuations leave limited upside.

The Analyst’s Case

Santander’s downgrade is a valuation call more than a fundamental one. Nokia’s stock has climbed sharply on AI-driven enthusiasm, particularly around AI-RAN partnerships and 6G positioning, but the market may have gotten ahead of the earnings story. The consensus analyst price target sits at $7.56, already below Nokia’s current trading price of $8.28. Danske Bank and DNB Carnegie have also moved to Hold with a EUR 6.50 price target, suggesting Santander is not alone in its skepticism. The trailing P/E of 64x looks demanding for a company whose trailing EPS stands at $0.13, even if the forward P/E of 23x reflects more realistic near-term earnings expectations.

What the Fundamentals Show

Nokia’s Q4 2025 results were solid. Net sales reached $6.07 billion, with EPS of $0.17, meeting consensus expectations. Mobile Infrastructure posted an operating margin of 20.5%, its highest quarterly figure in 2025, while Network Infrastructure grew net sales 7% in the quarter. Optical Networks was a standout, growing 17% with orders from AI and cloud customers reaching EUR 2.4 billion for the full year. Management guided 2026 operating profit to EUR 2 billion to EUR 2.5 billion. The fundamentals remain intact, though they may already be reflected in the share price.

Why the Move Matters Now

Nokia’s six-month price gain of 77.91% has been fueled largely by AI infrastructure optimism, MWC announcements, and the Infinera acquisition narrative. The stock is trading well above the 200-day moving average of $5.86 and near its 52-week high of $8.82. Meanwhile, Mobile Infrastructure full-year 2025 net sales declined versus 2024, the Portfolio Businesses segment posted an operating loss of EUR 97 million, and Nokia faces North American headwinds tied to customer losses. Management has also flagged that Q1 2026 will see a sequential decline somewhat more than normal seasonality would imply, adding near-term pressure to the earnings trajectory.

What It Means for Your Portfolio

For investors who have held Nokia through its rally, Santander’s downgrade is a timely reminder that price appreciation creates its own risk. The AI and 6G thesis remains intact over the long term, and management’s restructuring into Network Infrastructure and Mobile Infrastructure segments reflects genuine strategic clarity. But at current valuations, with the analyst community’s average target sitting below the market price and sector headwinds in mobile persisting, the risk-reward has shifted. Santander’s downgrade reflects a view that the risk-reward has shifted unfavorably at current valuations.