Ericsson (NASDAQ:ERIC) Shares Gap Down - Here's What Happened

Key Points

• Ericsson shares gapped down after the company’s quarterly update, opening at $10.51 versus a prior close of $11.72 and later trading around $10.32, a drop of about 13.4%.
• The company met EPS expectations with Q2 adjusted earnings of $0.13 per share, but revenue missed forecasts as lower IPR licensing sales and weakness in Networks and Enterprise weighed on results.
• Investors were also pressured by management’s cautious Q3 outlook, which warned of further margin pressure from higher rollout volumes and rising component costs, including memory-chip inflation.

Ericsson (NASDAQ:ERIC - Get Free Report)'s share price gapped down before the market opened on Tuesday . The stock had previously closed at $11.72, but opened at $10.51. Ericsson shares last traded at $10.3150, with a volume of 7,201,071 shares traded.

Trending Headlines about Ericsson

Here are the key news stories impacting Ericsson this week:

• Neutral Sentiment: Ericsson reported Q2 adjusted earnings of $0.13 per share, matching Wall Street expectations, which suggests core profitability held up better than feared. Ericsson earnings report and conference call
• Positive Sentiment: Margins in key businesses showed resilience, and the company’s return on equity remained strong, which may help limit downside if investors focus on operational efficiency. Zacks article on margin resilience
• Neutral Sentiment: Ericsson also continued its share repurchase program, buying back 2.5 million shares in July, which signals management confidence but is unlikely to offset the earnings reaction on its own. Share buyback announcement
• Negative Sentiment: Revenue came in below expectations as lower IPR licensing sales and weak Networks/Enterprise performance weighed on results, raising concerns about demand trends. MarketWatch article on margin pressure
• Negative Sentiment: Management warned that Q3 Networks gross margin could face additional pressure from higher rollout volumes and rising component costs, including memory-chip inflation, which is driving the stock lower. RTT News article on weak Q2 and cautious Q3 view

Analyst Upgrades and Downgrades

A number of research analysts recently issued reports on ERIC shares. Citigroup reiterated a "neutral" rating on shares of Ericsson in a report on Tuesday, April 28th. Weiss Ratings restated a "buy (b)" rating on shares of Ericsson in a report on Tuesday, June 2nd. Finally, Wall Street Zen lowered Ericsson from a "buy" rating to a "hold" rating in a research report on Saturday, April 25th. One equities research analyst has rated the stock with a Buy rating, six have given a Hold rating and two have issued a Sell rating to the stock. According to MarketBeat.com, Ericsson currently has an average rating of "Reduce" and a consensus price target of $11.00.

Ericsson Stock Down 13.4%

The stock has a market cap of $34.23 billion, a PE ratio of 12.88, a price-to-earnings-growth ratio of 1.99 and a beta of 0.93. The firm has a fifty day moving average of $12.09 and a 200 day moving average of $11.33. The company has a quick ratio of 0.93, a current ratio of 1.12 and a debt-to-equity ratio of 0.21.

Ericsson (NASDAQ:ERIC - Get Free Report) last announced its quarterly earnings results on Tuesday, July 14th. The communications equipment provider reported $0.13 earnings per share (EPS) for the quarter, hitting analysts' consensus estimates of $0.13. Ericsson had a return on equity of 22.17% and a net margin of 10.80%. On average, equities research analysts anticipate that Ericsson will post 0.64 EPS for the current fiscal year.

Institutional Investors Weigh In On Ericsson

Several hedge funds and other institutional investors have recently made changes to their positions in the business. Public Employees Retirement System of Ohio lifted its stake in Ericsson by 26.3% during the first quarter. Public Employees Retirement System of Ohio now owns 1,418,076 shares of the communications equipment provider's stock worth $15,982,000 after purchasing an additional 295,185 shares during the last quarter. Bank of New York Mellon Corp increased its stake in Ericsson by 8.5% in the first quarter. Bank of New York Mellon Corp now owns 160,581 shares of the communications equipment provider's stock valued at $1,810,000 after purchasing an additional 12,534 shares during the last quarter. Advisors Preferred LLC acquired a new stake in Ericsson during the first quarter worth approximately $493,000. Defiance ETFs LLC acquired a new stake in Ericsson during the fourth quarter worth approximately $13,766,000. Finally, Russell Investments Group Ltd. lifted its position in shares of Ericsson by 19.1% during the 4th quarter. Russell Investments Group Ltd. now owns 1,903,298 shares of the communications equipment provider's stock worth $18,603,000 after buying an additional 304,974 shares during the last quarter. Institutional investors and hedge funds own 7.99% of the company's stock.

Ericsson Company Profile

Ericsson AB is a Swedish multinational telecommunications equipment and services company headquartered in Stockholm. Founded in 1876 by Lars Magnus Ericsson, the company designs, develops and sells infrastructure, software and services that enable mobile and fixed-line networks worldwide. Ericsson serves a global customer base that includes mobile network operators, enterprise customers and public-sector organizations across Europe, the Americas, Asia-Pacific, the Middle East and Africa.

The company's core activities center on building and modernizing network infrastructure, with a particular focus on radio access networks (RAN), core network software, cloud-native solutions and network management systems.

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