What’s Happening With Ericsson’s Stock?

Ericsson stock (NASDAQ: ERIC) has increased by about 34% in 2024, outperforming the broader indices. Ericsson reported third-quarter results that exceeded expectations, with sales totaling SEK 61.8 billion, representing a modest 1% year-over-year decline. Notably, the company achieved a significant 55% sales increase in North America, which was offset by declines in other key market regions. That said, margins have increased with ERIC’s adjusted gross margins growing to 46.3% up from 39.2% in the year-ago period, due to a higher mix of sales from the U.S. – which is seen as a high-value market. Ericsson’s Q3 performance was positively impacted by retroactive intellectual property rights (IPR), licensing, and a customer settlement, which benefited Ericsson’s Networks’ gross margin.

The adjusted EBITDA reached SEK 7.8 billion, with a 12.6% margin, benefiting from cost reduction initiatives. Net income improved to SEK 3.9 billion, compared to a loss of SEK 30.5 billion in the previous year, with diluted earnings per share EPS at SEK 1.14. To add to this, the company’s free cash flow before mergers and acquisitions was strong at SEK 12.9 billion, highlighting effective inventory management. Ericsson’s Q3 2024 report highlights substantial progress in executing its strategic and operational objectives, driven by achievements in programmable networks and mobile network contract acquisitions across diverse markets. That said, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

A key highlight of the quarter was the establishment of a strategic joint venture with leading mobile network operators, securing a stable global supply of Network APIs. Additionally, Ericsson further bolstered its 5G patent licensing portfolio through new agreements, with projected intellectual property rights (IPR) revenues expected to exceed SEK 13 billion in 2024.

ERIC stock has performed worse than the broader market in each of the last 3 years. Returns for the stock were -7% in 2021, -44% in 2022, and 13% in 2023.
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We forecast Ericsson Revenues to be $24.8 billion for the fiscal year 2024, flat y-o-y. Given our revenues and EPS forecast changes, we have revised Ericsson’s Valuation to around $8 per share, based on a $0.50 expected EPS and a 15.3x P/E multiple for the fiscal year 2024. The company’s stock appears appropriately priced at the current levels (Dec 30).

Looking ahead, Ericsson’s sales outlook for the fourth quarter is influenced by several factors. In the Networks segment, the strong third-quarter performance sets a high baseline, leading to expectations of below-average seasonality in the fourth quarter. In Cloud Software and Services, the sequential decline of 1% from Q2 to Q3 is anticipated to continue, with Q4 sales also expected to be below average due to the timing of project deliveries. Furthermore, the Enterprise segment is expected to face additional sales pressure in Q4, driven by the strategic decision to concentrate on profitable markets and products. Moving on to profitability, the company anticipates a gross margin in the range of 47% to 49% in Q4. Ericsson also expects full-year restructuring costs to total approximately SEK 4 billion.

It is helpful to see how its peers stack up. Check out how ERIC’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 12/30/2024
[2] Cumulative total returns since the end of 2016