Ericsson (OM:ERIC B): A Fresh Look at Valuation After Recent Share Price Momentum

Telefonaktiebolaget LM Ericsson (OM:ERIC B) has caught the market’s attention lately as investors evaluate its stock performance and recent returns. With month and past 3 months returns showing some movement, there is growing curiosity about what is next for the Swedish telecom giant.

See our latest analysis for Telefonaktiebolaget LM Ericsson.

Ericsson’s share price has gained some ground in the past quarter, notching a 21.4% return, and the 1-year total shareholder return now sits at 6.1%. Momentum is building off recent lows, which offers investors a renewed sense of optimism compared to the muted start earlier this year.

If you are tracking Ericsson's turnaround, it could be the perfect moment to broaden your perspective and discover See the full list for free.

Amid growing optimism, the central question is whether Ericsson’s improved momentum signals an undervalued opportunity for investors, or if recent gains mean that any future growth is already reflected in the current share price.

Most Popular Narrative: 4.6% Overvalued

With Ericsson's last close at SEK91.44, the most widely-followed narrative fair value comes in at SEK87.38, resulting in a modest premium to the target. This gap reflects how analysts are weighing the company’s medium-term outlook against cautious earnings forecasts and sector dynamics.

Accelerating adoption of 5G stand-alone networks, network slicing, and differentiated enterprise connectivity is creating new monetization opportunities for operators. This is 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. This requires 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.

Read the complete narrative.

Want to know which pivotal upgrades and bold growth assumptions frame this slight premium? Discover the calculated optimism, revenue levers, and profit margin dynamics behind the narrative’s conviction. The quantitative drivers and market chess moves powering this valuation may surprise you.

Result: Fair Value of $87.38 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent geopolitical tensions or renewed weakness in major emerging markets could quickly challenge the optimism that is fueling Ericsson’s latest narrative.

Find out about the key risks to this Telefonaktiebolaget LM Ericsson narrative.

Another View: The SWS DCF Model Suggests Deep Value

While analysts' price targets paint Ericsson as slightly overvalued by market standards, our DCF model offers a contrasting take. It values Ericsson shares at SEK139.61. This implies the stock trades well below its intrinsic worth. Could the market be overlooking deeper value opportunities linked to Ericsson’s future cash flows?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Telefonaktiebolaget LM Ericsson Narrative

Should you have your own perspective or prefer a hands-on approach, you can dive into the figures and craft a unique narrative for yourself in just a few minutes. Do it your way

A great starting point for your Telefonaktiebolaget LM Ericsson research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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