Ericsson Earnings: Weak Results Are as Expected; Selloff Unwarranted Despite Soft Outlook

As expected, Ericsson’s second-quarter results were weak, with reduced wireless network spending in the U.S. causing a big dip in organic sales and pressuring margins, relative to last year. While the second-quarter performance was in-line to slightly better than what management had publicly anticipated, management wavered on the timing of a reacceleration, which it previously expected in the second half of 2023. None of this has any bearing on our long-term forecast. We expect mobile network spending to be cyclical, but for there to be very little average annual growth over the long term. We are maintaining our SEK 95 fair value estimate and believe the stock is undervalued.