Ericsson (Hold, TP: SEK84.00) - 2025 could be a tale of two halves
Ericsson’s broad-based strength in its Q1 results and supportive Q2 guidance, undemanding valuation, and strong balance sheet could position it as a relative outperformer amid geopolitical uncertainty, in our view. That said, we see challenges mounting for H2e: 1) gross margin headwinds (key for its share price); 2) faded earnings and FCF momentum with -17% adj. EBITA and -32% FCF growth YOY in H2e; 3) low likelihood for share buybacks in 2025e, despite its over-capitalisation; and 4) potential CEO succession could create a wait-and-see scenario. We have raised our 2025–2026e adj. EBITA by 7–0% and reiterate our HOLD and SEK84 target price as we continue to have a below-consensus view.Ericsson provides communications technology and services. Co.'s services, software and infrastructure – especially in mobility, broadband and the cloud – enable the telecom industry and other sectors to do business, increase efficiency, improve the user experience and capture new opportunities. Co. has more than 110,000 professionals and customers in more than 180 countries. Co. provides support for networks with more than 2.5 billion subscribers. Co.'s core business areas are called Radio, Core and Transmission and Telecom Services. Co. divides its operations into three business segments: Networks, Global Services and Support Solutions.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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