Last Update 19 Feb 26

Fair value Increased 4.47%

ERIC B: Trusted Tech Alliance And New Partnerships Will Shape Risk Balance

Analysts have nudged their average price target on Telefonaktiebolaget LM Ericsson higher by roughly SEK 4 per share, citing updated assumptions for modest revenue growth, improved profit margins, and a slightly lower future P/E, even with a small lift in the discount rate.

Analyst Commentary

Recent Street research on Telefonaktiebolaget LM Ericsson has focused largely on fine tuning price targets, with several firms adjusting their estimates by SEK 1 to SEK 3 per share. These moves reflect updated views on the company’s ability to execute on its plans and how that may feed into valuation over time.

Bullish Takeaways

Bullish analysts see room for Ericsson to create value if it can translate its current business mix into steadier earnings, which would help support the higher price targets reported in recent research.
The series of target raises in SEK terms signals that some analysts are more comfortable with Ericsson’s ability to deliver on operational plans without needing a materially higher P/E to justify their numbers.
Adjustments higher in the price targets, even when modest, suggest that upside scenarios are being given slightly more weight in some models, tied to execution on cost control and revenue quality rather than aggressive growth assumptions.
For investors focused on valuation, these updated targets suggest that bullish analysts see a case for Ericsson’s current share price to better reflect its earnings potential if management continues to deliver on its plans.

Bearish Takeaways

Bearish analysts may point out that the recent price target changes are relatively small in SEK terms, which can signal only limited headroom in their models compared to current trading levels.
The reliance on modest tweaks to assumptions rather than clear, quantified growth drivers can be read as caution on the strength or visibility of future earnings improvement.
If valuation support depends on maintaining current assumptions for margins and capital allocation, any execution misstep could quickly reduce the justification for the higher targets.
Investors who prefer a wider margin of safety may view these incremental target moves as leaving less room for error, particularly if earnings progress does not track the updated assumptions embedded in the research.

What's in the News

Microsoft and Ericsson are leading a new "Trusted Tech Alliance," a 15 company consortium built around shared principles for secure, trusted technology use across borders, with a focus on data storage and digital sovereignty concerns (Reuters).
Ericsson and the University of Toronto agreed a multi year partnership, with Ericsson committing US$1m over three years to support R&D in next generation, AI powered mobile communications and talent development in Canada.
Ericsson and Mastercard announced a collaboration that links the Ericsson Fintech Platform with Mastercard Move, aiming to help telecom operators, banks and fintechs expand digital wallets and payment services, with an initial global rollout starting in the Middle East and Africa.
Ericsson and Microsoft disclosed a joint development that brings advanced 5G capabilities into Windows 11 through integration with Microsoft Intune and Ericsson Enterprise 5G Connect, targeting policy driven, secure laptop connectivity for enterprise customers.
Ericsson reported successful 5G Standalone trials with the Italian Navy using an end to end Ericsson 5G SA network to support secure, real time data exchange and connected systems in maritime operations.

Valuation Changes

Fair Value: SEK 87.97 to SEK 91.89, a modest uplift in the modelled estimate.
Discount Rate: 6.43% to 6.61%, a small increase that makes future cash flows slightly less valuable in the models.
Revenue Growth: 1.11% decline to 0.44% growth, shifting from a mild contraction assumption to a modest growth outlook in the forecasts.
Profit Margin: 7.69% to 9.13%, reflecting higher expected profitability in the revised assumptions.
Future P/E: 19.79x to 16.95x, indicating a lower valuation multiple being used in the updated analysis.

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Key Takeaways

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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