Ericsson shares: Price analysis before buying or selling

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ISIN code: SE0000108656

Ticker: STO: ERIC-B

Index or market: Xetra

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Elements to consider before selling or buying Ericsson shares

Analysis N°1

We'll essentially be monitoring the strategies implemented by the group to position itself on emerging markets with merger or acquisition operations carried out in these countries or economic zones.

Analysis N°2

The services segment is also a promising segment for Ericsson which could develop further in the coming years. This particularly concerns the network management services market.

Analysis N°3

The existing competition within this sector is obviously fierce so it's also necessary to take the rapid changes in this market into account, which is technically very complex as well. Keeping a close eye on all publications of giants of the telecommunications industry is vital, especially those involving major innovations in this sector.

Analysis N°4

Finally, patent filings made by Ericsson can of course have a very significant impact on the value of its share on the stock market.

Analysis before buying or selling Ericsson shares

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General presentation of Ericsson

Before you invest in Ericsson shares, you should of course have all the information you need to make a relevant analysis of this stock on the stock market, and that includes a good knowledge of the company and its activities. This is why we are now offering you some specific information about the group and its sources of income.

Ericsson AB is a Swedish company that operates in the telecommunications sector. More specifically, the company specialises in the design, production and sale of fixed and mobile telecommunications systems and equipment.

To better understand the company's activities, they can be divided into different divisions according to the share of turnover they generate, as follows:

Firstly, the majority of Ericsson Group's revenues come from telephony systems and equipment and transmission networks. These activities generate 71.4% of the company's turnover.
Services account for a further 25.8% of the company's turnover. These include network management and control services and systems integration.
Finally, the remaining 2.8% of turnover comes from multimedia equipment.

The Ericsson Group currently operates and owns 7 production sites around the world.

It is also interesting to know the geographical distribution of the company's revenues, as only 0.5% of its turnover comes from Sweden. The rest comes from Europe and Latin America (23.5%), North America (31.7%), India, Asia and Oceania (27.3%), the Middle East and Africa (10%) and the rest of the world (7%).

Photo credits: ©wolterk/123RF.COM

The major competitors of Ericsson

Let's now discover the direct competitive environment of the Ericsson group with a complete presentation of its main competitors in its sector of activity.

Motorola

Ericsson's first direct competitor is Motorola Inc., an American company founded in 1928 and subsequently split into two in 2011. Motorola specialises in electronics and telecommunications and is based in the Chicago suburb of Schaumburg. Today, it comprises the Motorola Solutions and Motorola Mobility entities. Motorola is also part of Lenovo, which acquired it from Google in 2014.

Huawei

Another direct competitor of Ericsson is Huawei Technologies Co Ltd which is a Chinese company founded in 1987 and based in Shenzhen, China. It specialises in information and communication technologies and was formerly a supplier of telecommunication networks to the country's operators.

ZTE

This company, also known as Zhongxing Telecommunication Equipment Company Limited, is a telecoms equipment manufacturer listed on the Hong Kong and Shenzhen stock exchanges. It has a customer base of over 500 network operators in more than 140 countries worldwide.

Nokia Corporation

This Finnish company is a multinational telecommunications company founded in 1865. In 1998 it was the leading manufacturer of mobile phones until 2011. Since then, Nokia has expanded its activities, including network activities through its subsidiary Nokia Networks, in addition to its historical activity in the manufacture of mobile phones and smartphones.

Apple

Of course, this competition study should also include the American giant Apple, formerly known as Apple Computer, which is an American multinational company specialising in the creation and marketing of consumer electronics such as computers and software. The group has several flagship products to its credit, including the iPhone mobile phone, the iPad tablet, the Apple Watch and the iTunes player. Today, the Apple Group employs 137,000 people and operates more than 506 Apple Stores in over 25 countries around the world, as well as an online shop where it sells Apple and third-party devices and software.

Samsung Electronics

Finally, the last direct competitor of the Ericsson group is undoubtedly the Samsung Electronics group which is a Korean company specialising in the manufacture of electronic products. This company is also a wholly owned subsidiary of the Samsung Group, which is one of the main chaebols in Korea. The group currently employs over 308,745 people and is one of the world's largest companies according to a Forbes Global ranking. The Samsung Group is also the second largest company in the high-tech sector after Apple in terms of turnover.

The major partners of Ericsson

Amazon

In 2016, Ericsson signed several strategic partnerships with a few large groups. First with Amazon and the opening of an Innovation Centre in Australia. The objective is to benefit from Amazon Web Service infrastructures in Cloud, NFV and SDN technologies.

Intel

Ericsson signed a partnership that same year with Cisco, then with Intel in order to realise the first industrial 5G router.

PSA

In 2017, the PSA group signed a partnership agreement with Orange and Ericsson as part of a technological experiment on 5G and its possible use in the automotive sector. It's aimed at using the evolution of 4G technology to 5G into the manufacture of connected vehicles such as with intelligent transport systems.

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The factors in favour of a rise in the Ericsson share price:

First of all, we can of course highlight as one of the Ericsson Group's greatest strengths its very high flexibility in terms of product supply. The company is able to adapt its production to rising or falling demand and thus take account of changing market requirements. The same applies to the management of commercial solutions, which is also very flexible according to needs.

Ericsson is also a highly qualified company when it comes to mobile systems technology. The solutions developed and marketed by the company are considered to be of high quality, which effectively strengthens the company's brand image and boosts sales worldwide.

Industry analysts have also highlighted Ericsson's strong ability to reduce operating costs where necessary and to protect margins. To this end, the group has implemented a strategy that has proven to be very effective, mainly aimed at achieving economies of scale. This has enabled it to maintain a good level of profitability to date.

We also appreciate the company's strong international presence. Indeed, Ericsson currently markets its products and solutions in more than 180 countries around the world. This geographical distribution of its sales on the different continents prevents it from being too exposed to one and the same economic sector.

Of course, the Ericsson Group does everything in its power to maintain its position among the market leaders, in particular by striving to remain a highly innovative and technologically advanced company. To this end, it invests a lot of money in research and development every year and succeeds in developing new innovative solutions on a frequent and regular basis.

Last but not least, the Ericsson Group's workforce is also a real strength of the company. Indeed, to date, the group has no less than 100,000 employees around the world, which once again enables it to respond effectively to market needs.

The factors in favour of a drop in the Ericsson share price:

If you're still wondering whether you should take a buy or sell position in the Ericsson share, the few arguments for the company's growth that we've just cited may encourage you to opt for a buy strategy. However, before you take a decision in this direction, you should also be aware that this company also has weak points that you should not overlook in your analyses. These are the two main weaknesses of the Ericsson Group at the moment:

First of all, from a purely financial point of view, stock market investors and shareholders are hesitant about this stock because of the results published by the Ericsson Group. Indeed, the company shows a high variability in operating results over the last few years. This lack of stability can of course cause the market great concern by reducing long-term visibility and thus have a negative influence on the price of this asset.

Finally, it should also be noted that the Ericsson Group presents significant risks with regard to its relationship with its customers. This concerns in particular the credits granted to some of these customers and therefore a longer time to achieve the expected results following orders. This could also worry traders about the risk of non-payment of some important invoices.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions or a solicitation to buy or sell an asset.

Frequently Asked Questions

Where can I follow Ericsson's financial results and balance sheets?

If you wish to perform a financial analysis of Ercissson before trading this stock online, we recommend that you read the annual and quarterly financial statements of this stock. You can find these results on the company's website in the investor section. There you will also find information about the company's development and growth strategy and its objectives for the longer term.

What factors can cause the Ericsson share price to plummet?

Several external factors can have a negative influence on the Ericsson share price. These include a decline in financial results, the sale of some of its businesses to competitors, a commercial failure requiring major investments, or news about a competitor that causes it to lose market share to that competitor.

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