Current Status of Ericsson's Share Value
Ericsson (NASDAQ: ERIC) saw a remarkable 34% surge in value in 2024, outshining broader market indices. The tech giant surpassed predictions in its third-quarter financials, bringing in a total sales figure of SEK 61.8 billion, representing a minimal 1% decrease compared to the previous year. Notably, Ericsson experienced a significant 55% surge in sales within North America, balancing out downturns in other prominent market regions. The company's adjusted gross margins climbed to 46.3%, up from 39.2% in the preceding period, due to a elevated share of sales from the U.S., regarded as a high-value market. Ericsson's third-quarter wins were boosted by retroactive intellectual property rights, licensing agreements, and a customer settlement, which fortified the Networks segment's gross margin.
The adjusted EBITDA amounted to SEK 7.8 billion, accompanied by a 12.6% margin, thanks to cost-saving initiatives. The net income boomed to SEK 3.9 billion, contrasting a loss of SEK 30.5 billion in the previous year, resulting in a diluted earnings per share (EPS) of SEK 1.14. The company's robust free cash flow prior to mergers and acquisitions stood at SEK 12.9 billion, showcasing effective inventory management.
Ericsson's Q3 2024 report validates significant advancement in pursuing its strategic and operational objectives, driven by triumphs in programmable networks and mobile network contract acquisitions across multiple markets.
For those seeking a more secure and fruitful investment journey, the "High Quality Portfolio" is worth exploring. This ensemble of 30 stocks has showcased superior returns with lower risk compared to the benchmark S&P 500 index over the past four years, offering a smoother investment experience, as indicated by "High Quality (HQ) Portfolio performance metrics".
One of the quarter's significant aspects was the creation of a strategic joint venture with major mobile network operators, ensuring a consistent global supply of Network APIs. Moreover, Ericsson augmented its 5G patent licensing portfolio through new agreements, with projected intellectual property rights earnings exceeding SEK 13 billion in 2024.
Despite little growth in the past few years, ERIC stock has failed to match the market's stride. The stock's performance was -7% in 2021, -44% in 2022, and 13% in 2023.
However, the "High Quality (HQ) Portfolio", despite ERIC's weak performance, has delivered better returns with reduced risk compared to the benchmark S&P 500 index over the past four years.
We predict Ericsson's revenue for fiscal year 2024 to be $24.8 billion, remaining flat year-over-year. Based on our revised forecasts for revenue and EPS, we've adjusted "Ericsson’s Valuation" to approximately $8 per share, with expectations of a $0.50 EPS and a 15.3x P/E multiple for fiscal year 2024. The stock appears fairly priced at its current levels (Dec 30).
As the year comes to a close, Ericsson anticipates several factors influencing its fourth-quarter sales outlook. The Networks segment's strong third-quarter performance sets high expectations for below-average fourth-quarter seasonality. In Cloud Software and Services, the sequential decline of 1% from Q2 to Q3 is projected to continue, with Q4 sales also predicted to be below average due to project delivery timings. Lastly, the Enterprise segment is expected to face additional sales pressure in Q4, driven by a strategic focus on profitable markets and products.
Overall, it's intriguing to observe how the company's peers fare on key metrics. You can find comparisons for various companies at "Peer Comparisons".
Consider investing in "Trefis Market Beating Portfolios" to maximize your returns.
Explore all "Trefis Price Estimates" for a comprehensive financial analysis.
Ericsson's stock price experienced a 34% increase in 2024, despite a slight decrease in revenues. However, according to Trefis' predictions, Ericsson's revenue for fiscal year 2024 is expected to remain flat at $24.8 billion.
Investors interested in a diverse portfolio with superior returns and lower risk may want to consider the "High Quality (HQ) Portfolio," which has outperformed the S&P 500 index for the past four years. Despite Ericsson's stock underperforming the market in recent years, the "High Quality (HQ) Portfolio" has delivered better returns with reduced risk compared to the benchmark index during this period.
