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Telefonaktiebolaget LM Ericsson Class B (ERIC)
NASDAQ:ERIC

Telefonaktiebolaget LM Ericsson (ERIC) AI Stock Analysis

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ER

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)

Telefonaktiebolaget LM Ericsson Business Overview & Revenue Model

Company DescriptionTelefonaktiebolaget LM Ericsson (ERIC) is a leading global provider of telecommunications equipment and services to mobile and fixed network operators. The company operates in several sectors, including networks, digital services, managed services, and emerging business, with a primary focus on developing and delivering technology solutions that enhance connectivity. Ericsson's core products and services include mobile broadband infrastructure, cloud solutions, and Internet of Things (IoT) technologies.
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
70
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
65
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
75
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.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
247.88B263.35B271.55B232.31B232.39B
Gross Profit
109.36B101.60B113.30B100.75B93.72B
EBIT
6.24B11.98B27.08B31.78B27.81B
EBITDA
16.16B27.96B36.55B38.92B36.81B
Net Income Common Stockholders
20.00M-26.45B18.72B22.69B17.48B
Balance SheetCash, Cash Equivalents and Short-Term Investments
60.76B44.77B47.09B66.98B50.43B
Total Assets
292.37B297.04B349.54B305.61B271.53B
Total Debt
45.54B54.33B42.23B41.13B39.46B
Net Debt
1.65B19.14B3.88B-12.92B-4.15B
Total Liabilities
199.39B199.63B216.23B198.51B186.35B
Stockholders Equity
94.28B98.67B134.81B108.78B86.67B
Cash FlowFree Cash Flow
42.62B3.88B24.67B34.44B23.62B
Operating Cash Flow
46.26B7.18B30.86B39.06B28.93B
Investing Cash Flow
-15.95B-8.71B-34.40B-19.88B-15.20B
Financing Cash Flow
-23.86B1.01B-15.93B-9.31B-12.49B

Telefonaktiebolaget LM Ericsson Technical Analysis

Technical Analysis Sentiment
Positive
Last Price8.34
Price Trends
50DMA
7.97
Positive
100DMA
7.97
Positive
200DMA
7.71
Positive
Market Momentum
MACD
0.15
Negative
RSI
60.00
Neutral
STOCH
53.83
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 8.34 is above the 20-day moving average (MA) of 7.83, above the 50-day MA of 7.97, and above the 200-day MA of 7.71, indicating a bullish trend. The MACD of 0.15 indicates Negative momentum. The RSI at 60.00 is Neutral, neither overbought nor oversold. The STOCH value of 53.83 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
75
Outperform
$236.03B26.0020.02%2.71%-5.34%-30.57%
MSMSI
74
Outperform
$67.84B44.02189.18%1.02%7.45%46.78%
HPHPE
70
Outperform
$18.57B7.0012.09%3.08%10.93%43.19%
68
Neutral
$24.13B12,150.001.67%2.16%-2.08%
68
Neutral
$12.24B34.987.58%2.40%-2.56%52.05%
NONOK
64
Neutral
$25.97B33.735.70%1.99%-9.96%-6.83%
60
Neutral
$10.94B10.48-7.04%2.99%7.55%-12.20%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
ERIC
Telefonaktiebolaget LM Ericsson
8.34
3.20
62.26%
CSCO
Cisco Systems
59.33
13.59
29.71%
JNPR
Juniper Networks
36.63
2.68
7.89%
MSI
Motorola Solutions
406.42
60.19
17.38%
NOK
Nokia
5.06
1.40
38.25%
HPE
Hewlett Packard Enterprise
16.86
0.16
0.96%

Telefonaktiebolaget LM Ericsson Earnings Call Summary

Earnings Call Date:Apr 15, 2025
(Q1-2025)
|
% Change Since: 11.95%|
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.