Send me real-time posts from this site at my email

Why Ericsson Stock Is Tanking Today

What happened

Shares of Ericsson (NASDAQ: ERIC) are tanking on Friday, down by 10% as of 11:40 a.m. EDT, after the company reported second-quarter earnings. The results came in below expectations, due in part to weakness in China.

So what

Revenue in the second quarter came in at 54.9 billion Swedish kronor ($632.7 million), which missed the consensus estimate of 57.6 billion SEK. That all resulted in earnings per share of 1.1 SEK ($0.13), compared with the 1.23 SEK per share that analysts were expecting. The telecommunications company, which provides equipment and infrastructure, attributed the shortfall to weak demand in China.

Image source: Getty Images.

Ericsson had previously hoped to capitalize on China's deployment of 5G technology but acknowledged that it no longer expects to win those contracts. Sweden recently banned 5G equipment purchases from China's Huawei over national security concerns, with Ericsson getting caught in the crossfire as China retaliates.

Now what

In an interview with Barron's, CFO Carl Mellander warned that investors should expect Ericsson to have "materially lower market share" going forward. Ericsson will seek to compensate for weakness in China by strengthening its position in other markets, according to the finance chief. On the bright side, the broader radio access network (RAN) market is showing strong signs and is now forecast to grow 10% in 2021, up from a previous expectation of 3%.

Ericsson's release contrasts to Finnish peer Nokia, which said earlier this week that it expects to boost its full-year outlook.

10 stocks we like better than Telefonaktiebolaget LM Ericsson
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Telefonaktiebolaget LM Ericsson wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of June 7, 2021

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue