Ericsson Sees Unusually High Options Volume (NASDAQ:ERIC)

Key Points

• Ericsson saw unusual options activity on Tuesday, with traders buying 5,236 put options, up 117% from the average daily volume of 2,412. That suggests a notable increase in bearish hedging or speculation.
• The company’s latest quarter was a mixed bag: adjusted EPS of $0.13 matched expectations, but revenue missed due to weaker IPR licensing sales and softer Networks/Enterprise performance. Management also warned that Q3 Networks gross margin could face pressure from higher rollout volumes and rising component costs.
• ERIC shares fell sharply in midday trading, dropping to $10.15 as investors reacted to the weak revenue and cautious outlook. Despite the selloff, Ericsson continued its share buyback program and institutional ownership remained active.

Ericsson (NASDAQ:ERIC - Get Free Report) was the recipient of some unusual options trading activity on Tuesday. Stock traders acquired 5,236 put options on the company. This is an increase of 117% compared to the average daily volume of 2,412 put options.

More Ericsson News

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

Ericsson Stock Performance

ERIC stock traded down $1.56 during midday trading on Tuesday, reaching $10.15. 19,955,207 shares of the company's stock traded hands, compared to its average volume of 10,417,876. The firm has a market capitalization 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 company has a 50-day moving average price of $12.09 and a two-hundred day moving average price of $11.33. Ericsson has a 52 week low of $7.16 and a 52 week high of $13.77. The company has a debt-to-equity ratio of 0.21, a quick ratio of 0.93 and a current ratio of 1.12.

Ericsson (NASDAQ:ERIC - Get Free Report) last posted its quarterly earnings results on Tuesday, July 14th. The communications equipment provider reported $0.13 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%. As a group, equities analysts anticipate that Ericsson will post 0.64 EPS for the current year.

Institutional Inflows and Outflows

Large investors have recently added to or reduced their stakes in the stock. ABC Arbitrage SA increased its position in shares of Ericsson by 36.7% during the fourth quarter. ABC Arbitrage SA now owns 4,389,009 shares of the communications equipment provider's stock valued at $42,354,000 after buying an additional 1,179,194 shares during the period. BNP Paribas Financial Markets boosted its position in shares of Ericsson by 42.9% in the second quarter. BNP Paribas Financial Markets now owns 3,350,029 shares of the communications equipment provider's stock valued at $28,408,000 after acquiring an additional 1,005,398 shares during the period. Russell Investments Group Ltd. boosted its position in shares of Ericsson by 19.1% in the fourth quarter. Russell Investments Group Ltd. now owns 1,903,298 shares of the communications equipment provider's stock valued at $18,603,000 after acquiring an additional 304,974 shares during the period. Public Employees Retirement System of Ohio grew 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 valued at $15,982,000 after acquiring an additional 295,185 shares in the last quarter. Finally, Defiance ETFs LLC purchased a new position in Ericsson during the fourth quarter valued at approximately $13,766,000. Institutional investors own 7.99% of the company's stock.

Wall Street Analyst Weigh In

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

About Ericsson

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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