Telefonaktiebolaget LM Ericsson Class B (ERIC.B) AI Stock Analysis

• Market Cap: kr319.22B
• Dividend Yield: 3.12%
• Average Volume (3M): 7.07M
• Price to Earnings (P/E): 12.9
• Beta (1Y): 0.80
• Revenue Growth: -2.65%
• EPS Growth: N/A
• Country: SE
• Employees: 92,866
• Sector: Services
• Sector Strength: N/A
• Industry: Communication Equipment
• EPS (TTM): 3.33
• Shares Outstanding: 3,109,595,700
• 10 Day Avg. Volume: 10,617,979
• 30 Day Avg. Volume: 7,068,121
• PEG Ratio: -149.63
• Price to Book (P/B): 3.18
• Price to Sales (P/S): 1.21
• P/FCF Ratio: 7.03
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: kr86.61
• Price Target Upside: -5.10% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 8
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 72 Outperform
• Price Target: kr101.00 ▲(10.67% Upside)

Ericsson's stock score is driven by a solid valuation and positive technical indicators, despite some financial performance concerns. The attractive P/E ratio and dividend yield enhance its appeal, while the technical analysis suggests potential for further gains. However, the decline in revenue and free cash flow growth remains a risk that needs addressing.

Telefonaktiebolaget LM Ericsson Class B Business Overview & Revenue Model

Company Description

Telefonaktiebolaget 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 Money

Ericsson generates revenue through several key streams, including the sale of network equipment, software solutions, and managed services to telecommunications operators and enterprises. A significant portion of their revenue comes from the deployment of 5G technology, as operators invest heavily in upgrading their infrastructures. Additionally, Ericsson earns from licensing its intellectual property, which includes patents related to mobile telecommunications standards. The company also engages in strategic partnerships with various industry players to enhance its service offerings and expand its market reach, contributing to its financial performance. Ongoing demand for cloud services and IoT solutions further bolsters its revenue, as businesses increasingly seek to leverage digital transformation.

Telefonaktiebolaget LM Ericsson Class B Financial Statement Overview

Summary

Ericsson demonstrates a stable financial position with strong profitability and efficient equity use. However, the decline in revenue and free cash flow growth poses potential risks. The company should focus on reversing the revenue decline and improving cash flow generation to enhance its financial health.

Income Statement

Ericsson's income statement shows a mixed performance. The TTM data reveals a gross profit margin of 46.5%, indicating strong cost management. However, the net profit margin is relatively low at 7.04%, and revenue has declined by 2.63% compared to the previous period. The EBIT margin is healthy at 11.84%, but the EBITDA margin is lower at 9.51%. Overall, while profitability is decent, the revenue decline is a concern.

Balance Sheet

The balance sheet reflects a stable financial position with a debt-to-equity ratio of 0.50, suggesting moderate leverage. The return on equity is strong at 19.57%, indicating efficient use of equity. The equity ratio stands at 36.34%, showing a solid equity base. Despite the moderate leverage, the company maintains a strong equity position, which is a positive indicator.

Cash Flow

Cash flow analysis shows challenges with a negative free cash flow growth rate of -17.10% in the TTM period. The operating cash flow to net income ratio is 0.33, indicating that operating cash flow is lower than net income, which could be a concern. The free cash flow to net income ratio is 0.92, suggesting that most of the net income is converted into free cash flow. While cash flow conversion is good, the decline in free cash flow growth is a risk.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	239.41B	247.88B	263.35B	271.55B	232.31B	232.39B
Gross Profit	112.82B	109.36B	104.40B	113.30B	100.75B	93.72B
EBITDA	31.91B	16.16B	-9.96B	35.10B	38.37B	36.80B
Net Income	24.47B	20.00M	-26.45B	18.72B	22.69B	17.48B
Balance Sheet
Total Assets	281.27B	292.37B	310.14B	349.54B	305.61B	271.53B
Cash, Cash Equivalents and Short-Term Investments	50.82B	60.76B	44.77B	47.09B	66.98B	50.43B
Total Debt	43.75B	45.54B	54.33B	42.23B	41.13B	39.46B
Total Liabilities	179.22B	199.39B	212.73B	216.23B	198.51B	186.35B
Stockholders Equity	102.22B	94.28B	98.67B	134.81B	108.78B	86.67B
Cash Flow
Free Cash Flow	30.69B	42.62B	1.71B	24.67B	34.44B	23.62B
Operating Cash Flow	33.78B	46.26B	7.18B	30.86B	39.06B	28.93B
Investing Cash Flow	-15.14B	-15.95B	-8.71B	-34.40B	-19.88B	-15.20B
Financing Cash Flow	-10.88B	-23.86B	1.01B	-15.93B	-9.31B	-12.49B

Telefonaktiebolaget LM Ericsson Class B Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 91.26
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SE:ERIC.B, the sentiment is Positive. The current price of 91.26 is below the 20-day moving average (MA) of 92.13, above the 50-day MA of 87.77, and above the 200-day MA of 79.74, indicating a neutral trend. The MACD of 0.57 indicates Positive momentum. The RSI at 52.82 is Neutral, neither overbought nor oversold. The STOCH value of 72.02 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SE:ERIC.B.

Telefonaktiebolaget LM Ericsson Class B Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ERIC.B	72 Outperform	kr319.22B	12.86	26.04%	3.12%	-2.65%	―
HTRO	67 Neutral	€4.01B	31.13	3.38%	―	0.01%	-71.63%
HMS	65 Neutral	$25.81B	58.94	12.77%	―	13.97%	20.46%
EPEN	62 Neutral	kr3.85B	26.47	9.68%	1.09%	-1.85%	-16.44%
IVSO	57 Neutral	€13.76B	64.91	21.88%	0.90%	5.69%	4.82%
Sector *	55 Neutral	$13.29B	17.42	10.03%	0.93%	7.13%	-12.93%
NETI.B	48 Neutral	€1.22B	828.41	0.87%	―	-15.56%	-92.87%