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Nokian Tyres; A short to revisit on payment of attractive dividend


Nokian Tyres published its Financial Statement Release 2019 on February 4, 2020 at 2:00 p.m. Finnish time.

The business was able to maintain it’s 2019 dividend making it an attractive short term play for investors interested in the 5,8% yield. The Nokian Tyres share price  was at €27,16 at the close of business on February 13th, a price that put an end to our short on February 4th before it had a chance to build.

The dividend is due to be paid on April 17th with shares going ex-dividend on April 3rd

The Short Revisited

With the Nokian Tyres stock trading around the €27,16 mark, investors may feel that the price is overvalued should it rally to €27,20 to €32,20. However, a pass through the €32.20 threshold may mark the end of this short opportunity.

The current target price of the stock is around €22 with Finish Analyst, Inderes and their recommendation is REDUCE.

More reasons for potential downside

There are more problems for Nokian Tyres to deal with since the turn of the year,  with the Coronavirus hampering car manufacturers worldwide delivery of parts.

Nokian Tyres are also overextended. There is a costly expansion in the US to contend with whilst the current market is a bad one for tyres in general – and with 70% of their sales coming from winter tyres, climate change is effecting Russian and Nordic sales.

Also, minority owner Bridgestone has sold it’s 10% stake in the business, seemingly no longer concerned Nokian Tyres competitive edge on winter tyres.

Unproven CEO in a tough market

CEO Mrs. Hille Korhonen has a long career of building successful brands first with Fiskars and then as a CEO of Finnish drinks business, Alko Oyj from 2014-2017.

However, since joining Nokian Tyres in 2017 – she has faced the toughest challenge of her professional career.

The last six quarters have been down and the share price is currently down on the €35 levels  it was at on her appointment June 2017.

Until the second quarter of 2018, Nokian Tyres had seen twelve consecutive quarters of positive growth.

Here at The Armchair Trader, we expect to see added selling pressure as soon as the stock goes ex-dividend on 3rd April. We feel that Nokian Tyres fundamentals do not support the case for holding this stock once the dividend has been paid.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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