Analyst Note| Mark Cash |
We are raising our fair value estimate for no-moat Ericsson to SEK 110 from SEK 105 because we’re more confident that 5G networks will lead to a longer period of growth and that cost-extraction efforts have made the company’s margin profile more sustainable. We consider shares slightly overvalued. While we expect service providers to continue to multisource vendors, limiting the total opportunity, Ericsson is gaining precious share as 5G rolls out globally. Previous restructuring actions and development costs are increasing gross and operating margin profiles that we believe Ericsson can sustain over the 5G rollout period.