Is Telefonaktiebolaget LM Ericsson (publ) (ERIC) A Risky Investment?


Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) finished Thursday with an addition of $0.16 to close at $5.92, an upside of 2.78 percent. An average of 7,704,940 shares of common stock have been traded in the last five days. There was a gain of $0.08 in the past week, and it reached a new high 16 times over the past 12 months. The last 20 days have seen an average of 10,675,165 shares traded, while the 50-day average volume stands at 11,099,687.

ERIC stock has decreased by -3.27% in the last month. The company shares reached their 1-month lowest point of $5.67 on 12/16/22. With the stock rallying to its 52-week high on 02/09/22, shares of the company touched a low of $5.16 and a high of $12.78 in 52 weeks. It has reached a new high 15 times so far this year and lost -45.54% or -$4.95 in price. In spite of this, the price is down -53.67% from the 52-week high.

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Valuation Metrics

Telefonaktiebolaget LM Ericsson (publ) (ERIC) has a trailing price-to-earnings (P/E) ratio of 9.08. The stock’s beta is 0.55. Other valuation ratios to consider include the trailing price-to-sales (P/S) ratio at 0.80, the price-to-book (PB) ratio at 1.49, and the price-to-cash flow ratio at 13.91.

The company has a payout ratio of 191.60%. The company’s most recent quarterly dividend payment was $0.0760 a share, representing a down of -14.61% from $0.0890 last year. Its latest decrease dividend $0.0130 reported on Wednesday September 7 2022.

Financial Health

The quick ratio of Telefonaktiebolaget LM Ericsson (publ) for the three months ended September 29 was 0.80, and the current ratio was 1.20, indicating that the company is not able to meet its debt obligations. Further, the company has a long term debt to equity ratio of 0.25 and a total debt to equity ratio of 0.31 for the quarter ending September 29. Telefonaktiebolaget LM Ericsson (publ)’s EBITDA margin for the year ending September 29 is 17.11%, while its operating margin for the same period stands at 12.10%. Its gross profit as reported stood at $11.75 billion compared to revenue of $27.09 billion.

Earnings Surprise

For the three-month period that ended September 29, Telefonaktiebolaget LM Ericsson (publ) had $685.74 million in cash and short-term investments compared to $170.6 million in total debt. In the quarter under review, the net income was up than the previous quarter. The company posted a net income of $2.44 billion in the quarter, while revenues were grew 22.96%. The analyst consensus anticipated Telefonaktiebolaget LM Ericsson (publ)’s latest quarter earnings to come in at $0.16 per share, but it turned out to be $0.16, a 0.00% surprise. For the quarter, EBITDA amounted to $895.41 million. At the end of the quarter ending September 29, Telefonaktiebolaget LM Ericsson (publ)’s stock balance sheet showed total liabilities of 21.29 billion.

Technical Picture

From a technical analysis perspective, let’s take a brief look at Telefonaktiebolaget LM Ericsson (publ) (ERIC) price momentum. RSI 9-day as of the close on 29 December was 44.92%, suggesting the stock is Neutral, with historical volatility in this time frame at 41.81%.

As of today, ERIC’s price is $5.86 +1.37% or $0.08 from its 5-day moving average. ERIC is currently trading -7.06% lower than its 20-day SMA and -21.59% lower than its 100-day SMA. However, the stock’s current price level is -8.64% below the SMA50 and -31.64% below the SMA200.

The stochastic %K and %D were 16.59% and 17.27%, respectively, and the average true range (ATR) was 0.17. With the 14-day stochastic at 21.83% and the average true range at 0.17, the RSI (14) stands at 45.42%. The stock has reached 0.04 on the 9-day MACD Oscillator while the 14-day reading was at -0.19.

Analyst Ratings

Morgan Stanley launched coverage on Telefonaktiebolaget LM Ericsson (publ) (NASDAQ: ERIC) in its analyst report released on November 08, 2022. The firm assigned the stock an Equal-weight rating. The consensus rating for Telefonaktiebolaget LM Ericsson (publ) (ERIC) among analysts is Overweight. According to current brokerage recommendations, 2 brokerage firms advise that investors sell ERIC, while 11 suggest investors hold. There are 2 analysts who rate the stock as underweight. The stock is rated overweight by 3 analysts, while 11 others rate it as a “buy”.

What is ERIC’s price target for the next 12 months?

Analysts predict a range of price targets between $5.29 and $10.57, with a median target of $7.67. Taking a look at these predictions, the average price target given by analysts for Telefonaktiebolaget LM Ericsson (publ) (ERIC) stock is $7.76.


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