Ericsson Sees Its Expected 2023 Weakness as Temporary, but Firm’s Long-Term Enthusiasm Seems Extreme

Meager sales growth and margin pressure plagued Ericsson’s fourth quarter, and management cited several items it expects to weigh on 2023 results. The firm maintains that these challenges are transitory and that performance will pick up substantially by 2024. While 2023 may prove worse than a typical year, we’re unconvinced that Ericsson’s future growth will look any different from the recent past. Nothing in the quarter changes our low-growth long-term outlook. That said, we believe the company will remain a key player as 5G networks are built out across the globe, so the stock looks overly punished relative to our unchanged SEK 100 fair value estimate.