Last Update 09 Dec 25

ERIC B: Evolving 5G Bans And New Contracts Will Shape Risk Reward Balance

Analysts have nudged up their price target on Telefonaktiebolaget LM Ericsson by SEK 5 to SEK 95, citing higher post Q3 revenue and margin expectations while maintaining a generally cautious stance on the shares.

Analyst Commentary

Recent target price revisions reflect a more constructive view on Ericsson's near term execution, tempered by lingering concerns over its longer term growth profile and industry headwinds.

Bullish Takeaways

Bullish analysts highlight improved revenue and margin expectations following the Q3 report, supporting modest multiple expansion from current levels.
Upward target revisions toward the mid to high SEK 90s signal confidence that operational efficiencies and cost controls can sustain better profitability than previously assumed.
Some see 2027 valuation metrics as providing a floor for the shares, suggesting limited downside if Ericsson delivers against revised earnings trajectories.
JPMorgan's higher triple digit target underscores the potential for upside should execution on strategic initiatives and network investment cycles track ahead of current consensus.

Bearish Takeaways

Bearish analysts maintain an Underweight or Neutral stance, arguing that structural challenges in telecom spending and competitive intensity continue to cap long term growth.
Earlier target cuts in the low SEK 60s range illustrate concerns that end market demand and pricing pressure could restrict margin expansion, even after recent improvements.
Limited direct monetization from artificial intelligence trends is seen as a constraint on Ericsson's ability to capture premium valuation multiples versus broader tech peers.
Some remain cautious that the recent rebound in estimates might prove cyclical rather than structural, leaving downside risk if operators delay or reduce network rollout plans.

What's in the News

Germany and the wider EU are moving closer to binding bans on Huawei and ZTE equipment in 5G networks. This could shift European radio access market share toward alternative vendors such as Ericsson and Nokia (Light Reading, Bloomberg).
China is scaling back the use of Ericsson and Nokia gear in domestic networks, subjecting new contracts to lengthy security reviews that favor local suppliers and underscore rising East West tech decoupling (Financial Times).
VodafoneThree has selected Ericsson and Nokia for a GBP 2B network expansion contract, positioning Ericsson to deploy RAN technology across 10,000 sites as part of a major UK rollout (Bloomberg).
Telia has extended its multi country RAN partnership with Ericsson under a four year deal spanning Sweden, Norway, Lithuania, and Estonia, reinforcing Ericsson's role in Northern European 5G coverage and innovation programs.
Ericsson has secured an eight year, roughly SEK 12.5B agreement to power most of VodafoneThree's next generation UK mobile network, including sole nationwide core network vendor status and extensive 5G Standalone deployments.

Valuation Changes

Fair Value Estimate unchanged at approximately SEK 87.4 per share, implying no revision to intrinsic value despite updated assumptions.
Discount Rate risen slightly from about 6.33 percent to 6.39 percent, reflecting a modest increase in perceived risk or required return.
Revenue Growth effectively unchanged, with the long term assumption remaining modestly negative at around minus 0.64 percent.
Net Profit Margin stable at roughly 7.92 percent, indicating no material change in long run profitability expectations.
Future P E nudged up slightly from 18.79x to 18.82x, signaling a marginally higher valuation multiple applied to forward earnings.

Growth in 5G, AI, and digital transformation is driving demand for Ericsson's advanced network solutions, supporting strong revenue and margin prospects.
Enhanced operational efficiency and technology leadership are improving profitability, enabling long-term market share gains and diversified revenue streams.
Geopolitical risks, emerging market instability, fierce competition, inconsistent software performance, and persistent regulatory burdens threaten Ericsson's margins, revenue reliability, and long-term profitability.

Catalysts

About Telefonaktiebolaget LM Ericsson

Provides mobile connectivity solutions to communications service providers, enterprises, and the public sector.What are the underlying business or industry changes driving this perspective?

Accelerating adoption of 5G stand-alone networks, network slicing, and differentiated enterprise connectivity is creating new monetization opportunities for operators-driving demand for Ericsson's advanced network equipment and software, which should support above-market revenue growth in the medium to long term.
Expansion of AI-powered applications and edge compute is expected to significantly boost network data traffic, requiring further buildout and modernization of telecom infrastructure where Ericsson has strong product and R&D positioning-providing a long-term tailwind to both revenues and gross margins.
Ongoing digital transformation across multiple sectors (including defense, mission-critical services, and industrial automation) is opening high-margin enterprise and private network opportunities for Ericsson, which should improve revenue diversification and margin profiles over time.
Increased operational efficiency from structural cost actions, supply chain optimization, and the application of AI across processes is reducing OpEx and improving EBITA margins, creating meaningful headroom for future earnings growth even in a flat market environment.
Ericsson's technology leadership and entrenched positions in key home markets (North America, India, Japan), along with an expanding IPR portfolio, positions the company to capture incremental market share and recurring licensing revenue, resulting in sustainable long-term improvements in top-line growth and profitability.

Telefonaktiebolaget LM Ericsson Earnings and Revenue Growth

Telefonaktiebolaget LM Ericsson Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Telefonaktiebolaget LM Ericsson's revenue will decrease by 0.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 7.0% today to 7.5% in 3 years time.
Analysts expect earnings to reach SEK 18.2 billion (and earnings per share of SEK 5.95) by about September 2028, up from SEK 17.3 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting SEK23.0 billion in earnings, and the most bearish expecting SEK14.1 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.3x on those 2028 earnings, up from 14.2x today. This future PE is lower than the current PE for the GB Communications industry at 49.4x.
Analysts expect the number of shares outstanding to grow by 0.06% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.3%, as per the Simply Wall St company report.

Telefonaktiebolaget LM Ericsson Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Intensifying geopolitical tensions and tariff uncertainties, especially between key markets such as the US, China, and Europe, may lead to further fragmentation of supply chains and unpredictable market access, potentially increasing Ericsson's operating costs and limiting revenue growth in key regions.
Prolonged weakness or investment pauses in large emerging markets (such as India), as seen in Q2 and with uncertain recovery timing, expose Ericsson's revenue to regional demand swings, hindering sustainable top-line growth.
Sustained competition from both Eastern and Western vendors, and margin pressure from potential industry consolidation among telecom operators (as hinted by intense pricing and market share battles), may erode Ericsson's pricing power, reducing gross margins and long-term profitability.
Continued underperformance or volatility in software and services segments relative to peers-despite some recent margin gains-could jeopardize Ericsson's ambitions for recurring, high-margin revenues, increasing the risk of earnings inconsistency.
Increasing legal, regulatory, and currency-related challenges, including ongoing cost burdens from restructuring and compliance (notably with persistent high restructuring costs and regulatory scrutiny around tariffs and data privacy), could compress net margins and constrain future earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of SEK78.647 for Telefonaktiebolaget LM Ericsson based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK99.0, and the most bearish reporting a price target of just SEK56.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK242.3 billion, earnings will come to SEK18.2 billion, and it would be trading on a PE ratio of 17.3x, assuming you use a discount rate of 6.3%.
Given the current share price of SEK73.94, the analyst price target of SEK78.65 is 6.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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