Ericsson (OM:ERIC B) Valuation in Focus After Securing Exclusive SEK 12.5bn UK 5G Network Deal

Telefonaktiebolaget LM Ericsson (OM:ERIC B) just landed a headline-making partnership as the exclusive UK nationwide core network vendor for VodafoneThree's next-generation mobile network. This SEK 12.5 billion, eight-year deal not only cements Ericsson’s role at the heart of one of Europe’s most ambitious network consolidations, but also means its 5G Standalone hardware and software will be powering key UK cities and millions of users. For investors, this kind of long-term, high-visibility contract is the sort of event that can swing the outlook and draw fresh attention to the stock’s underlying value.

While Ericsson's revenue and net income growth have faced some pressure this year, the company’s share price still eked out a 3% gain over the past twelve months. That is against a backdrop of slightly negative year-to-date performance, with mixed momentum in the past month and past 3 months. The VodafoneThree win arrives just as the market starts to debate the steadiness of Ericsson’s growth narrative, punctuated by both regulatory setbacks and wins in new segments. Taken together, this suggests investors are weighing both risks and new growth opportunities as Ericsson’s transformation story unfolds in real time.

So after a period of muted returns and this major breakthrough, is Ericsson a rare value play with more room to run, or has the market already started pricing in future growth from its new UK partnership?

Most Popular Narrative: 2.1% Undervalued

Market watchers see Ericsson as trading slightly below its estimated fair value, leaving the door open for potential upside if narrative assumptions play out.

Expansion of AI-powered applications and edge compute is expected to significantly boost network data traffic. This will require 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.

What drives this near-term valuation edge? The narrative is built on ambitious projections around emerging tech and future profit potential. These are numbers that most investors have not seen yet. If you want to discover what future earnings, margin assumptions, and industry shifts are fueling this valuation call, the details may surprise you. Get ready for the numbers and narrative behind Ericsson’s calculated fair value.

Result: Fair Value of $77.62 (UNDERVALUED)

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

However, persistent regulatory hurdles and ongoing margin pressures remain. Any escalation on these fronts could quickly alter the outlook for Ericsson’s value story.

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

Another View: What Does the DCF Model Say?

Looking beyond analyst targets, our SWS DCF model offers a different angle on Ericsson’s valuation by focusing on its future cash flows. This approach suggests the market still might not recognize the underlying potential. This could open up a bigger opportunity for value-focused investors.

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

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Telefonaktiebolaget LM Ericsson for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Telefonaktiebolaget LM Ericsson Narrative

If you want to dig deeper or outline your own case, shaping a personal Ericsson outlook is quick and easy. You can create your narrative 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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