North America picking up steam

Ericsson (Buy, TP: SEK85.00) - Earnings momentum accelerating

Similar to Q2, we expect a positive mix-driven gross margin and FCF beat, with Q3e adj. EBITA 12% above post-Q2 Infront consensus, signalling accelerating earnings momentum in H2e and improving investor sentiment. The AT&T contract ramp-up appears to be on track, and we find the SEK10.6bn divestment of non-core iconectiv favourable, sharpening the business profile and increasing the potential for share buybacks in 2025e. We reiterate our BUY and have raised our target price to SEK84 (83).

Supportive data points for the AT&T deal

Vitrolife (Buy, TP: SEK280.00) - Underlying trends set to continue

Vitrolife stock has recovered nicely since its Q2 report (up c33% since the day before the report). We believe most of the Q2 trends that triggered the revaluation of Vitrolife remain, heading into the Q3 results. For the quarter, we are c1% below consensus on sales and c4% below on adj. EBITDA. We have increased our forecasts from 2025 and our target price to SEK280 (250). We reiterate our BUY.

Pick your contender

Following our ‘investment company weeks’ at DNB Markets in Stockholm, we give a brief update on our view of the sector and summarise our impressions from lunch presentations with 13 investment company CEOs. From a broader perspective, we note the increased investor interest in the sector, as well as the structurally lower discounts to NAV, albeit not in the VC-oriented companies. We continue to have Investor as our sector top pick, with additional BUYs on Latour, Kinnevik, VEF and Flerie.

Storytel (Buy, TP: SEK78.00) - Gross margin momentum

We are 7% above Modular Finance consensus Q3e adj. EBITDA on positive content mix and the full impact of recent cost actions. We have now seen the long-awaited shift in the investor base, but acknowledge that investors could still take a wait-and-see approach to Storytel’s new CEO (starts 1 October) and likely strategic review before there is a re-rating. We reiterate our BUY, with a trimmed SEK78 (80) target price; we continue to see a step-change in profitable growth and FCF generation at an undemanding valuation at a 2025e EV/EBITDA of 5x, P/E of 13x and OpFCF yield of 12%, whilst Storytel’...