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Ericsson Shares Up 10.9% in 3 Months: What's Driving the Rally?
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Shares of Ericsson (ERIC - Free Report) have risen 10.9% in the past three months, despite uncertainties caused by the COVID-19 pandemic, against 2.8% decline of the industry. Ericsson currently has a Zacks Rank #2 (Buy) and a VGM Score of A. It has a market cap of nearly $29.6 billion.
The company has a long-term earnings growth expectation of 25.9% compared with 13.9% of the industry. We believe that the Sweden-based telecom gear maker has several growth drivers in place and enjoys a strong foothold in its served markets.
Growth Drivers
Ericsson is witnessing a healthy momentum in its business, based on the strategy to increase its investments for technology leadership, including 5G. In Networks, the company’s ongoing activities are to invest in R&D to safeguard a leading product portfolio and cost leadership; increase investments in automation and serviceability driving down costs; and selectively gain market share based on technology and cost competitiveness.
Ericsson has been making progress toward building a stronger company in the long term, while investing in supply chain capacity. It currently has 91 commercial 5G agreements (of which 48 are publicly announced) and includes 39 live 5G networks on four continents. Ericsson’s “cost and efficiency program” has been devised to generate higher cost savings. The company is focusing on structural changes that will generate lasting efficiency gains and boost cost competitiveness.
Ericsson Radio System comprises hardware, software and services for radio, RAN Compute, antenna system, transport, power as well as site solutions. It enables smooth and cost-effective migration from 4G to 5G, supporting communications service providers to launch the avant-garde technology and grow 5G coverage fast. The company’s 5G radio access technologies provide the infrastructure required to meet growing demand for high-bandwidth connections and support the real-time, high-reliability communication requirements of mission-critical applications.
Courtesy of investing in R&D combined with operational efficiency, Ericsson has the world’s leading patent portfolio in cellular technology, with more than 54,000 granted patents and above 100 signed licensing agreements. The company is also focused on stabilizing its IT, cloud and project portfolio, and re-establishing profitability in managed services by handling existing contracts as well as investing in automation and AI.
With current visibility, the company maintains the financial targets for 2020 and 2022. The approved operator merger in North America is expected to build an even stronger 5G momentum and investments are expected to intensify during the second half of the year.
Trend in Estimate Revisions
The Zacks Consensus Estimate for the company’s next-year earnings has been revised 3.3% upward in the past 60 days to 62 cents.
Turtle Beach has a trailing four-quarter positive earnings surprise of 46.4%, on average.
Plantronics has a trailing four-quarter positive earnings surprise of 103.5%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.
Ooma has a trailing four-quarter positive earnings surprise of 228.2%, on average.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Ericsson Shares Up 10.9% in 3 Months: What's Driving the Rally?
Shares of Ericsson (ERIC - Free Report) have risen 10.9% in the past three months, despite uncertainties caused by the COVID-19 pandemic, against 2.8% decline of the industry. Ericsson currently has a Zacks Rank #2 (Buy) and a VGM Score of A. It has a market cap of nearly $29.6 billion.
The company has a long-term earnings growth expectation of 25.9% compared with 13.9% of the industry. We believe that the Sweden-based telecom gear maker has several growth drivers in place and enjoys a strong foothold in its served markets.
Growth Drivers
Ericsson is witnessing a healthy momentum in its business, based on the strategy to increase its investments for technology leadership, including 5G. In Networks, the company’s ongoing activities are to invest in R&D to safeguard a leading product portfolio and cost leadership; increase investments in automation and serviceability driving down costs; and selectively gain market share based on technology and cost competitiveness.
Ericsson has been making progress toward building a stronger company in the long term, while investing in supply chain capacity. It currently has 91 commercial 5G agreements (of which 48 are publicly announced) and includes 39 live 5G networks on four continents. Ericsson’s “cost and efficiency program” has been devised to generate higher cost savings. The company is focusing on structural changes that will generate lasting efficiency gains and boost cost competitiveness.
Ericsson Radio System comprises hardware, software and services for radio, RAN Compute, antenna system, transport, power as well as site solutions. It enables smooth and cost-effective migration from 4G to 5G, supporting communications service providers to launch the avant-garde technology and grow 5G coverage fast. The company’s 5G radio access technologies provide the infrastructure required to meet growing demand for high-bandwidth connections and support the real-time, high-reliability communication requirements of mission-critical applications.
Courtesy of investing in R&D combined with operational efficiency, Ericsson has the world’s leading patent portfolio in cellular technology, with more than 54,000 granted patents and above 100 signed licensing agreements. The company is also focused on stabilizing its IT, cloud and project portfolio, and re-establishing profitability in managed services by handling existing contracts as well as investing in automation and AI.
With current visibility, the company maintains the financial targets for 2020 and 2022. The approved operator merger in North America is expected to build an even stronger 5G momentum and investments are expected to intensify during the second half of the year.
Trend in Estimate Revisions
The Zacks Consensus Estimate for the company’s next-year earnings has been revised 3.3% upward in the past 60 days to 62 cents.
Key Picks
Some other top-ranked stocks in the broader industry are Turtle Beach Corporation (HEAR - Free Report) , Plantronics, Inc. and Ooma, Inc. (OOMA - Free Report) . While Turtle Beach sports a Zacks Rank #1 (Strong Buy), Plantronics and Ooma carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Turtle Beach has a trailing four-quarter positive earnings surprise of 46.4%, on average.
Plantronics has a trailing four-quarter positive earnings surprise of 103.5%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.
Ooma has a trailing four-quarter positive earnings surprise of 228.2%, on average.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>