Ericsson Earnings: Poor Results and Muted Outlook Are Baked in to the Depressed Stock

Ericsson posted weak fourth-quarter sales, largely consistent with the trend that persisted throughout 2023, and said it expects 2024 to be a similarly challenging year. We’re also not impressed with margins following the progress management said it has made in its cost-reduction program. However, we’ve long been skeptical of the margin targets the firm has forecast, and we believe global mobile network spending must pick up eventually as mobile data usage continues to grow rapidly and carriers must continue building out 5G networks, which will reverse Ericsson’s networks revenue decline. We’re reducing our fair value estimate to SEK 92 from SEK 95 due to a bleaker 2024 outlook, but we think the stock remains undervalued.