Telefonaktiebolaget LM Ericsson (ERIC) AI Stock Analysis

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Telefonaktiebolaget LM Ericsson

(NASDAQ:ERIC)

68Neutral

Ericsson's overall stock score reflects its stable financial performance and positive earnings call sentiment, particularly driven by strong growth in the Americas and improved margins. However, the high P/E ratio and regional sales declines pose challenges. Technical indicators suggest short-term upward momentum, but caution is warranted due to potential overvaluation.

Telefonaktiebolaget LM Ericsson (ERIC) vs. S&P 500 (SPY)

Market Cap

$27.61B

Dividend Yield2.17%

Average Volume (3M)29.13M

Price to Earnings (P/E)176.8

Beta (1Y)0.72

Revenue Growth-2.08%

EPS GrowthN/A

CountryUS

Employees92,866

SectorTechnology

Sector Strength65

IndustryCommunication Equipment

Share Statistics

EPS (TTM)0.13

Shares Outstanding3,086,495,800

10 Day Avg. Volume24,327,282

30 Day Avg. Volume29,132,818

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)3.02

Price to Sales (P/S)0.00

P/FCF Ratio6.09

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$9.80

Price Target Upside18.21% Upside

Rating ConsensusHold

Number of Analyst Covering3

Telefonaktiebolaget LM Ericsson Business Overview & Revenue Model

Company DescriptionTelefonaktiebolaget LM Ericsson (publ), together with its subsidiaries, provides communication infrastructure, services, and software solutions to the telecom and other sectors. It operates through four segments: Networks, Digital Services, Managed Services, and Emerging Business and Other. The Networks segment offers radio access network solutions for various network spectrum bands, including integrated high-performing hardware and software. This segment also provides integrated antenna and transport solutions; and a range of service portfolio covering network deployment and support. The Digital Services segment offers software-based solutions for business support systems, operational support systems, communication services, core networks, and cloud infrastructure. The Managed Services segment provides networks and IT managed, network design and optimization, and application development and maintenance services to telecom operators. The Emerging Business and Other segment includes emerging businesses comprising Internet of Things; iconectiv; Cradlepoint that offers wireless edge WAN 4G and 5G enterprise solutions; and Red Bee Media, MediaKind, and other new businesses. It operates in North America, Europe and Latin America, the Middle East and Africa, South East Asia, Oceania, India, North East Asia, and internationally. Telefonaktiebolaget LM Ericsson (publ) was founded in 1876 and is headquartered in Stockholm, Sweden.

How the Company Makes MoneyEricsson generates revenue through multiple streams, primarily from selling and licensing telecommunications equipment and software to network operators worldwide. The company's networks segment, which includes offerings like radio access networks and transport solutions, is a significant contributor to its earnings. Additionally, Ericsson's digital services segment provides software and services that help operators modernize and manage their networks, further driving revenue. The managed services unit offers outsourcing solutions, including network operation and optimization, which also contribute to the company's income. Partnerships with major telecom operators and ongoing investments in research and development to innovate and expand its product portfolio are critical factors supporting Ericsson's revenue generation.

Telefonaktiebolaget LM Ericsson Financial Statement Overview

Summary

Ericsson demonstrates stable financial health with moderate profitability and efficient cash flow management. Despite challenges in net income growth, the company maintains operational efficiency and a strong balance sheet.

Income Statement

Positive

The income statement shows a moderate performance with a gross profit margin of 45.56% TTM and a net profit margin of 0.64% TTM, indicating stable profitability despite low net income. The EBIT margin improved to 8.83% TTM, and the EBITDA margin reached 18.51% TTM, showing operational efficiency. Revenue growth was slightly positive at 0.68% TTM, demonstrating steady revenue generation.

Balance Sheet

Positive

The balance sheet reflects a solid financial position with a debt-to-equity ratio of 0.49 TTM, indicating manageable leverage. The equity ratio is 30.95% TTM, showcasing a balanced capital structure. However, return on equity is relatively low at 1.87% TTM, suggesting limited returns on shareholder investments.

Cash Flow

Positive

The cash flow statement highlights robust cash generation with a free cash flow growth rate of -1.42% TTM, which is stable year-over-year. The operating cash flow to net income ratio is strong at 28.28 TTM, and the free cash flow to net income ratio is substantial at 26.10 TTM, indicating efficient conversion of income to cash.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
249.58B	247.88B	263.35B	271.55B	232.31B	232.39B
	Gross Profit
113.71B	109.36B	101.60B	113.30B	100.75B	93.72B
	EBIT
22.05B	6.24B	11.98B	27.08B	31.78B	27.81B
	EBITDA
46.20B	16.16B	27.96B	36.55B	38.92B	36.81B
	Net Income Common Stockholders
1.61B	20.00M	-26.45B	18.72B	22.69B	17.48B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
52.13B	60.76B	44.77B	47.09B	66.98B	50.43B
	Total Assets
277.98B	292.37B	297.04B	349.54B	305.61B	271.53B
	Total Debt
42.42B	45.54B	54.33B	42.23B	41.13B	39.46B
	Net Debt
-2.17B	1.65B	19.14B	3.88B	-12.92B	-4.15B
	Total Liabilities
193.12B	199.39B	199.63B	216.23B	198.51B	186.35B
	Stockholders Equity
86.04B	94.28B	98.67B	134.81B	108.78B	86.67B
Cash Flow		Free Cash Flow
42.02B	42.62B	3.88B	24.67B	34.44B	23.62B
	Operating Cash Flow
45.54B	46.26B	7.18B	30.86B	39.06B	28.93B
	Investing Cash Flow
-13.31B	-15.95B	-8.71B	-34.40B	-19.88B	-15.20B
	Financing Cash Flow
-16.10B	-23.86B	1.01B	-15.93B	-9.31B	-12.49B

Telefonaktiebolaget LM Ericsson Technical Analysis

Technical Analysis Sentiment

Positive

Last Price8.29

Price Trends

50DMA

8.00

Positive

100DMA

7.97

Positive

200DMA

7.76

Positive

Market Momentum

MACD

0.14

Negative

RSI

57.01

Neutral

STOCH

61.02

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ERIC, the sentiment is Positive. The current price of 8.29 is above the 20-day moving average (MA) of 8.15, above the 50-day MA of 8.00, and above the 200-day MA of 7.76, indicating a bullish trend. The MACD of 0.14 indicates Negative momentum. The RSI at 57.01 is Neutral, neither overbought nor oversold. The STOCH value of 61.02 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ERIC.

Telefonaktiebolaget LM Ericsson Risk Analysis

Telefonaktiebolaget LM Ericsson disclosed 43 risk factors in its most recent earnings report. Telefonaktiebolaget LM Ericsson reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Telefonaktiebolaget LM Ericsson Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CSCO	75 Outperform	$235.59B	25.99	20.02%	2.69%	-5.34%	-30.57%
MSI	74 Outperform	$68.88B	33.82	189.18%	1.02%	7.45%	46.78%
HPE	70 Outperform	$21.66B	8.25	12.09%	3.08%	10.93%	43.19%
ERIC	68 Neutral	$27.61B	176.76	1.67%	2.17%	-2.08%	―
JNPR	68 Neutral	$12.23B	34.98	7.58%	2.42%	-2.56%	52.05%
NOK	64 Neutral	$26.32B	33.93	5.70%	1.98%	-9.96%	-6.83%
Sector *	60 Neutral	$10.96B	10.27	-6.73%	2.97%	7.73%	-11.60%

* Technology Sector Average

Performance Comparison

ERIC

Telefonaktiebolaget LM Ericsson

8.29

3.05

58.21%

CSCO

Cisco Systems

59.77

12.51

26.47%

JNPR

Juniper Networks

36.35

2.67

7.93%

MSI

Motorola Solutions

406.50

51.99

14.67%

NOK

Nokia

5.09

1.39

37.57%

HPE

Hewlett Packard Enterprise

16.89

-0.02

-0.12%

Telefonaktiebolaget LM Ericsson Earnings Call Summary

Earnings Call Date:Apr 15, 2025

(Q1-2025)

% Change Since: 11.28%|

Next Earnings Date:Jul 15, 2025

Earnings Call Sentiment Neutral

Ericsson showed strong financial performance in the Americas, especially in North America, and successfully improved margins across the board. However, these achievements were somewhat offset by sales declines in key regions like Asia, India, and Europe, as well as challenges posed by tariffs and macroeconomic uncertainties.

Q1-2025 Updates

Positive Updates

Strong Gross Margin and EBITA Margin

Ericsson achieved a gross margin of 48.5% and an EBITA margin of 12.6% in Q1 2025, reflecting broad-based improvement across all segments and market areas, driven by cost reduction actions and favorable product and market mix.

Growth in Market Area Americas

Sales in the market area Americas increased by 20% year-over-year, with particularly strong growth in North America at 38%, benefiting from contract wins and accelerated network investments.

Cloud Software and Services Achievement

For the first time ever, Cloud Software and Services achieved a positive EBITA in the first quarter, driven by improved gross margin and lower operating expenses.

Enterprise Wireless Solutions Growth

Enterprise Wireless Solutions grew by 20%, supported by higher subscriber and product sales in Enterprise Networking.

Negative Updates

Sales Decline in Asia, Oceania, and India

Sales in Southeast Asia, Oceania, and India decreased by 17% year-over-year, attributed to normalized operator investment levels in India.

Sales Decline in Europe, Middle East, and Africa

Sales in Europe, Middle East, and Africa declined by 7% year-over-year, with Europe remaining stable but offset by declines in other regions.

Tariffs and Macroeconomic Challenges

The ongoing macroeconomic turmoil and tariffs pose significant challenges, impacting the industry and introducing uncertainty into future forecasts.

Company Guidance

In the first quarter of 2025, Ericsson reported stable organic sales with a significant 20% year-over-year increase in the Americas market area, despite a challenging macroeconomic environment. The company achieved a gross margin of 48.5% and an EBITA margin of 12.6%. Networks sales grew 6% year-on-year to SEK 35.6 billion, with a notable 38% growth in the Americas. The Cloud Software and Services segment achieved its first positive first quarter, benefiting from a higher software share and improved delivery performance. However, sales in Europe, Middle East and Africa declined by 7% year-over-year, and sales in Southeast Asia, Oceania, and India decreased by 17% due to normalized investment levels. Ericsson's net sales for the quarter were SEK 55 billion, with a currency benefit of SEK 1.8 billion and a cash flow of SEK 2.7 billion. The company continues to focus on strategic priorities like programmable networks and network APIs, while maintaining a strong competitive position despite ongoing global economic uncertainty and tariff impacts.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.